This article first appeared in The Edge Malaysia Weekly on June 24, 2019 - June 30, 2019

LAST week, the merger between JF Apex Securities Bhd — a unit of locally listed Apex Equity Holdings Bhd — and Mercury Securities Sdn Bhd cleared a major hurdle.

At Apex Equity’s extraordinary general meeting (EGM) last Wednesday, the merger resolution was passed with 54.8%, or 100.85 million shares, voting in favour while the remaining 45.2%, or 83.19 million shares, voted against.

ACE Investment Bank Ltd and the Chan family are believed to have voted for the merger, whereas Lim Siew Kim — daughter of the late Tan Sri Lim Goh Tong — and her alleged associates are believed to have voted against the deal.

Notably, the resolution to adopt a new constitution did not go through. Requiring at least 75% voting in favour to carry the resolution, Apex Equity received only 54.8% support from the same shareholders.

Similarly, Siew Kim and her alleged associates are believed to have voted against the amendment of the constitution.

What does that mean? While the proposed merger has received the green light from shareholders of Apex Equity, will a twist emerge before the deal is completed?

Note that there are two legal cases yet to be resolved — the originating summons by Concrete Parade Sdn Bhd, as well as the persons acting in concert suit filed by Apex Equity and its subsidiary JF Apex.

Recall that Concrete Parade is seeking a declaration that the heads of agreement between Apex Equity and Mercury Securities on Sept 21 last year and the business merger agreement between JF Apex and Mercury Securities on Dec 18 last year are illegal, unlawful and void.

Meanwhile, Apex Equity is also in the midst of a legal case against 18 defendants, including Siew Kim, for allegedly acting in concert to obtain control of the company and breaching capital market rules in so doing.

Other defendants named include former investment banker Lim Beng Guan and his 95%-owned Concrete Parade, which has a 4.68% stake in Apex Equity. ZJ Advisory Sdn Bhd, which Beng Guan co-founded, is also a defendant.

A shareholder of Apex Equity who attended the EGM acknowledges that it is “concerning” that Siew Kim and her alleged associates have decided to scuttle the adoption of the new constitution “for no apparent reason”. It is worth noting, however, that this will not affect the merger.

“The shareholders have voted for the merger. Those who voted against have also been allowed to exercise their rights as shareholders. There were few to no questions asked when this resolution (amendment of constitution) was tabled. So, what is her reason for voting against?” he asks.

“We might see some delaying tactics. Siew Kim and her alleged associates still refuse to give up. They will try to go from different angles to block the merger, despite knowing that they are at the losing end,” another observer says. “The way I see it, once the shareholders have decided, the merger is very much a done deal already. It is not easy for them to block it.”

Currently, ACE IB is the single largest shareholder of Apex Equity with a 25.01% stake. The immediate family members of Apex Equity’s late founder Chan Guan Seng have about 16.52% equity interest.

It is believed that the Chan family voted in favour of the merger because they realise that Apex Equity needs a new leader, namely Mercury Securities, to help them run the company.

As for ACE IB, one valid reason for them to support the deal is that the combined earnings and valuation of an enlarged Apex Equity should increase. This should put ACE IB, which is required to exit Apex Equity after the merger, in a better position at the bargaining table with interested buyers.

Meanwhile, Siew Kim and her alleged associates —  Fun Sheung Development Ltd, Yenson Investments Ltd, Concrete Parade, Pinerains Sdn Bhd, Joymap Bridge Sdn Bhd and Cergas Megah (M) Sdn Bhd — collectively own 40.54%.

Siew Kim is the widow of the late Dick Chan Teik Huat, who is Guan Seng’s elder brother. The veteran stockbroker was ousted at Apex’s AGM in 2012 as his sister-in-law had voted against his re-election.

It is learnt that Siew Kim and her alleged associates had last week voted against the merger between JF Apex and Mercury Securities — two of a few remaining non-bank-backed stockbroking firms licensed by the Securities Commission Malaysia — because they do not want their shareholdings in Apex Equity to be diluted.

To recap, under the business merger agreement signed last year, Apex Equity will take over Mercury Securities’ stockbroking, corporate advisory and other related businesses for RM140 million, transferring the businesses to JF Apex.

Apex Equity was to pay RM48 million in cash and the remaining RM92 million via the issuance of 100 million new Apex shares to Mercury Securities, which is set to emerge as the single largest shareholder of Apex, owning 30.99% equity interest in the merged entity.

Post-merger, ACE IB’s shareholding will be diluted to 15.71%, the Chan family’s to 10.37%, while the stakes of Siew Kim and her alleged associates will drop to 25.7%.

A person familiar with the development of the Apex-Mercury saga points out that although the merger may seem like it has received shareholders approval by only a slim margin, the truth is far from it.

“Most minority shareholders actually voted in favour. The 100.85 million shares involved over 80 shareholders, whereas the against votes of 83.19 million shares are controlled by seven to eight shareholders only,” he says.

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