SINGAPORE (Aug 16): ISR Capital has admitted that a partner of the corporate advisory firm it has engaged for a major acquisition is also a director of the vendor in the deal.

In a filing late on Sunday, in response to queries from the Singapore Exchange, ISR said that Empire Capital partner Timothy Morrison was also a director of REO Magnetic. This is contrary to information ISR had given SGX only four weeks ago. And, it raises questions about conflicts of interest in ISR's bid to turn itself into a rare earths mining company.

On May 20, ISR signed a memorandum of understanding with REO Magnetic to look into the possibility of investing in its rare earths project in Madagascar. On June 9, ISR agreed to acquire a 19.9% stake in Tantalum Holding (Mauritius), a rare earths mining company, from REO Magnetic.

On June 30, ISR agreed to acquire another 40.1% in Tantalum from REO Magnetic to bring its total interest to 60%. ISR announced this on July 1. On the same day, it announced the appointment of Empire Capital as its corporate advisor, but it did not reveal the relationship between Morrison and REO Magnetic.

Last month, The Edge Singapore (Issue 737, July 18) reported that Morrison had been appointed a director of REO Magnetic on June 6. The newspaper also reported that ISR executive director Quah Su-Yin was aware of this. According to The Edge Singapore, Quah made this statement through ISR's external public relations firm Radiant Communications.

On July 18, SGX posed a number of queries to ISR. Among other things, it asked ISR to name the directors and shareholders of REO Magnetic. In response, ISR provided information filed by REO Magnetic with ACRA as at May 20, shortly before Morrison was appointed to the board.

On Aug 10 and 11, the Singapore Exchange asked ISR for more details about Empire Capital, among other things. SGX also specifically asked ISR to disclose whether any Empire Capital's office holders had links to REO Magnetic. In a statement late on Aug 14, ISR admitted that Morrison is a director of REO Magnetic.

In explaining why it had not previously disclosed Empire Capital's relationship with REO Magnetic, ISR claimed, in effect, that it was unaware of it. According to ISR, it had conducted a business records search on REO on May 20 but Morrison was appointed as a director of REO only on June 6. But this is at odds with the information provided to The Edge Singapore by Radiant Communications on behalf of ISR.

ISR added in its response to SGX that it doesn't view Morrison's appointment to the board of REO Magnetic to be a conflict of interest. According to ISR, Empire Capital's role is to source for and raise funding for the company from potential investors, and not to negotiate the terms of the sale and purchase agreements. "The board views that Mr Timothy Morrison's appointment may aid the process of the acquisition post signing the sale and purchase agreements," ISR said.