The largest shareholder wanted to underwrite a 1:1 open offer of new shares, potentially obtaining majority control without making a General Offer. Howel Thomas and his Wykeham Capital Asia Value Fund made sure that didn't happen, using the 75% approval requirement introduced in 2018.

Independent shareholders veto Tongda Hong Tai (2363) Whitewash Waiver
16 November 2020

Webb-site is pleased to note that independent shareholders have vetoed an attempt by the largest shareholder of Tongda Hong Tai Holdings Ltd (THT, 2363) to cement control of the company by underwriting a 1:1 open offer of new shares at a 77% discount to net asset value (circular here). If no other shareholders subscribed their non-transferable entitlements, then the deal could have raised the stake of Landmark Worldwide Holdings Ltd from 18.88% to as much as 59.44%, and the concert parties from 31.96% to 65.98%, without making a General Offer to buy the other shares under the Takeovers Code.

Such a deal requires a "Whitewash Waiver" of the General Offer obligation, and the requirement for that is a 75% approval of independent shareholders, the threshold having been raised from 50% on 13-Jul-2018. Your editor, David Webb, is a Deputy Chairman of the SFC's Takeovers Panel which oversaw that improvement in shareholder rights. One of the reasons for raising the approval threshold to 75% was that management of companies may warehouse friendly votes in the public float which then support transactions against the interest of independent shareholders (see page 17 of the conclusions paper).

Whether or not that happened In THT's case, the vote was 66.1% in favour and 33.9% against. Shares eligible to vote were 128.68m (68.04% not owned by the concert party), of which 69.84m voted, a turnout of 54.3%. Kudos to the Wykeham Capital Asia Value Fund run by Howel Thomas, which at last disclosure owns 20.99m shares (11.09%) of THT, given that only 23.68m shares voted against. In Hong Kong, if you are going to be a minority shareholder, be a big one if you can. Mr Thomas single-handedly vetoed the transaction.

©, 2020

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