Disgruntled minority shareholders rise up to defeat IT retailer Challenger’s delisting bid

SINGAPORE — A bid by local IT retailer Challenger Technologies to delist itself from the Singapore Exchange (SGX) has failed after it was voted down by minority shareholders, who argued that the exit offer price of 56 Singapore cents a share was far too low.

The rebuff to the majority shareholders came after a testy extraordinary general meeting (EGM) held at the company's headquarters at Ubi Link on Thursday (June 27), at which 11.36 per cent of shareholders present shot down the resolution for a voluntary delisting from the bourse.

The other 88.6 per cent of shareholders present supported the delisting.

Under the SGX’s listing rules, such a resolution requires shareholders representing more than 75 per cent of the shareholding to vote in favour and not more than 10 per cent against. Under the rules, Challenger must now remain a publicly listed company for at least 12 months before another offer can be made.

Homegrown Challenger, established 37 years ago, has 40 stores across Singapore, according to its website. The offer price valued Challenger at S$183 million.

Earlier this month, Challenger had accepted a final cash exit offer by Digileap Capital — a partnership between the Loo family that founded Challenger and Dymon Asia Private Equity — to delist at 56 Singapore cents apiece, amounting to a net offer of 54 Singapore cents after dividends are paid out. The deal was subject to shareholder approval — which has now been denied.

Independent adviser Deloitte & Touche Corporate Finance had also concluded that the deal was a "fair and reasonable" one. Challenger shares have been trading at about 55 Singapore cents for some time. The company is requesting that its earlier trading halt be lifted.

OFFER VALUATION 'FAR TOO CHEAP'

But a bloc of minority shareholders led by Pangolin Investment Management opposed the move, voicing their disagreement with the board of directors, who supported the delisting. Several had also questioned the independent adviser's findings.

In a previous SGX filing, Challenger had cited the poor transaction volume of the stock and compliance costs incurred by a bourse listing as reasons for the privatisation deal.

But Pangolin director James Hay said the price was “far too cheap” for a company like Challenger. His fund owns a 2.94 per cent stake in the company. Earlier, Pangolin stated that fair value for Challenger is S$1.15 a share, based on the company’s cash flow to shareholders and dividend payouts in previous years.

“We sensed that there was a disappointment that the offer price had come so low and we are disappointed by Mr Loo,” said Mr Hay, adding that he had never before experienced such a strong response by other smaller shareholders in his other overseas dealings.

One elderly shareholder, who has held shares in the company since its initial public offering almost a decade ago, said he knew Challenger's founder and chief executive, Mr Loo Leong Thye, to be a competent IT businessman.

"I never sold my shares and am happy to hold it for my children — (I am) a local investor holding a local company, and I look at Mr Loo as my partner," said the shareholder, who identified himself only as KC.

But he was upset by Mr Loo’s decision to delist at a “low” price and reminded the company's independent directors of their duty to maximise value for shareholders. Mr Loo is a director of Digileap.

Mr Tan Wee Ko, an executive director of Challenger, responded that the offer was the only one on the table, and that it was the job of directors to make sure such offers undergo due process, such as through a shareholders’ vote.

"Hearing (you say) the price is not right, I can also share with you that there are people, minority shareholders, who will vote ‘yes’ for it. These are people who wrote in to express their thanks for the past many years. So it is up to you, we are here to vote," said Mr Tan.

Speaking to the media after the vote, Mr Hay said Challenger can now focus on running the business and that Mr Loo can stop talking to investors to delist the firm. “People will always be buying electronics, and it is a brilliantly run company… We can get back to work.”

In a statement issued after the vote, Mr Loo said he respected the decision made by shareholders and appreciated “everyone’s support of the company in our journey to where we are today”.

“I am also heartened that many shareholders do not want to see us go and would like to remain invested in Challenger as a listed vehicle. While the retail business environment is challenging, we will continue to do our best and grow the company.”