SIAS cites ‘dilemma’ for minority shareholders amidst OCBC's GE offer

OCBC earlier announced a $1.4b offer to acquire the remaining 11.56% stake in GE.

The Securities Investors Association (Singapore) or SIAS said that OCBC’s voluntary unconditional general offer creates a dilemma for minority shareholders.

"In the recent cases of voluntary unconditional general offer, SIAS observed that the offers created dilemma to Minority Shareholders where they are not given a choice to make a decision due to terms of the offer," David Gerald, founder, president, and CEO of SIAS, said in a statement on 21 June.

“For example, if the Company has acquired more than 90% share holdings, it will be suspended for a period of time and shareholders who have not submitted their shares, regardless or not if they are agreeable to the offer price, will not be able to trade and their monies are locked up for a period of time,” he added.

On 10 May, OCBC announced a $1.4b voluntary unconditional general offer to acquire the remaining 11.56% stake in Great Eastern Holdings Limited (GE).

OCBC's offer, priced at $25.60 per share, represents a substantial premium of 36.9% over GE’s last traded price and premiums ranging from 38.6% to 42.4% over various time periods. 

Despite this, several long-term GE shareholders have publicly expressed dissatisfaction, believing the current offer undervalues the company.

On 14 June, discontent amongst minority shareholders intensified upon reviewing the Offeree circular, which included an opinion from Ernst & Young Corporate Finance Pte Ltd stating that OCBC's offer was "not fair but reasonable". 

OCBC subsequently confirmed its decision to maintain the $25.60 offer price and set a closing deadline of 12 July, disregarding the IFA's opinion in its announcement.

The minority shareholders argued that OCBC's stance contradicts recent guidelines from the Monetary Authority of Singapore emphasising fair dealing in financial transactions. They fear being forced into accepting an offer deemed unfair or facing prolonged lock-ups of their investments in an unlisted company.

SIAS, initially facilitating a dialogue between OCBC and GE shareholders scheduled for 20 June, canceled the session following OCBC's decision not to adjust its offer in light of the IFA's assessment.

“SIAS hopes that Company which intend to delist in future should provide an offer price which is truly “Fair and Reasonable” to all shareholders who have placed their trust in the Company, Board and Management with their hard-earned monies,” said Gerald.

On 21 June, SIAS sought clarity and transparency from OCBC regarding its final offer.

Key questions raised include whether OCBC considered Ernst & Young's assessment that the offer was "not fair but reasonable" when deciding against increasing the offer price, and how OCBC justifies what some perceive as an unfair offer for the remaining 11.56% of GE shares, given GE's substantial contribution to OCBC’s profits. 

Shareholders also seek insights into OCBC's strategic goals in initiating the voluntary unconditional general offer and whether there was intent to make GE a wholly owned subsidiary. 

Concerns extend to potential reputation risks for OCBC stemming from the offer's perceived fairness, as well as implications should GE shares face suspension due to failing to meet the free float requirement.