E&O shareholders play safe

KUALA LUMPUR: Many minority shareholders of Eastern & Oriental Bhd (E&O) who attended the AGM last Friday, Sept 30 were seen coming out from the meeting with a sour face.

A string of tough questions surrounding Sime Darby Bhd's acquisition of a 30% equity stake in E&O were raised to the board members. Another highlight was that shareholders blocked the nomination of two directors proposed by ECM Libra to the board.

Some minority shareholders have voiced their unhappiness that Sime Darby did not extend a mandatory general offer (MGO) to buy out all other shares in E&O after the conglomerate bought the block of shares at RM2.30 per share, or RM766 million cash, from three substantial shareholders.

A Minority Shareholders Watchdog Group official who was present at the meeting told The Edge Financial Daily that the board should have been more transparent.

"It is about board integrity. The board's role is to take care of all shareholders' rights. It is also about the independent directors' role to make sure that everything is in the best interest of all shareholders," the official said.

On the other hand, she pointed out that: "The MGO is a concern for Sime Darby, not E&O as a company. So this is really about the conduct of the (E&O) board. Now the SC (Securities Commission) is doing its investigations, we have to wait for the outcome."

To recap, the SC is currently monitoring all stock transactions by all parties, including Sime Darby, on the conglomerate's acquisition of a 30% stake in E&O.

The regulator has yet to determine if Sime Darby is obliged to make a MGO at RM2.30 per share for the remaining 70% stake in E&O. But the SC did not pin down a timeline for the outcome of its review.

Ironically, the existing board, including managing director Datuk Terry Tham — one of the three share vendors — and its chairman Datuk Azizan Abd Rahman, was re-elected at the AGM, despite the minority shareholders' unhappiness.

According to E&O's deputy managing director Eric Chan, the resolutions on the re-election of the existing board members were passed almost unanimously resulting in the entire board being reappointed.

Azizan, who is the spouse of SC chairman Tan Sri Zarinah Anwar, was also the centre of attention in Sime Darby's share purchase as he had accumulated E&O shares before the announcement. The filing with Bursa Malaysia show that between April and August, Azizan accumulated 450,000 E&O shares including one transaction of 100,000 shares bought on Aug 12 about two weeks before Sime Darby announced the acquisition on Aug 29.

Chan told the media that 75% of the voting shares present were against the resolution for the election of the two directors nominated by ECM Libra Foundation.

The ordinary resolutions on the election and re-election of a director require only a simple majority for approval.

"Although some minority shareholders may be angry but they are also being practical. The current board is critical to the success of E&O, and that's also why Sime Darby bought into E&O. If they (the minority shareholders) had blocked their re-election, it would have been worse for all parties," says an analyst.

While the nominations by ECM Libra were seen as a gauge of other shareholders' discontent with the lack of an MGO, its outcome was also not totally a surprise. "Perhaps the minority shareholders do not want to rock the boat," the analyst added.

Sime Darby is now the single largest shareholder in E&O with a 30% equity stake.

Meanwhile, Tham, who sold his 12.2% equity stake to Sime Darby at RM2.30 per share early September, currently holds a 5.1% shareholding. The other two vendors are Tan Sri Wan Azmi Wan Hamzah who still holds a 2.9% equity stake and GK Goh 3.5% in the property firm. The three collectively own 11.5% equity interest in E&O. Wan Azmi was present at last Friday's AGM.

At the press conference after the AGM, Chan dismissed the suggestion that Sime Darby would make changes to the management team, pointing out that all existing directors had been reappointed.

Over at Sime Darby, its chairman of the governance and audit committee, Tan Sri Andrew Sheng Len Tao has resigned from the board effective last Thursday. His resignation comes in tandem with his appointment as the president of the Fund Global Institute in Hong Kong.

The rally on E&O share price has lost steam amid the depressed market sentiment and continued uncertainties over whether an MGO was forthcoming. The stock slid to RM1.46 last Friday, down 20% from the three-year high of RM1.76 recorded on Sept 6.