This article first appeared in The Edge Malaysia Weekly on May 10, 2021 - May 16, 2021
A new substantial shareholder may emerge at Cycle & Carriage Bintang Bhd (CCB) as early as this Monday (May 10), according to reliable sources.
CCB shares climbed 25% in the afternoon trading session last Friday, from RM2.41 to RM3 apiece, giving the company a maarket capitalisation of RM302.23 million.
This development essentially means that Singapore-based Jardine Cycle & Carriage Ltd (JCCL) — the controlling shareholder of CCB, with a stake of about 76% — will face an obstacle in its efforts to take the company private.
Sources tell The Edge that Open Road Asia Sdn Bhd (ORA), an investment holding company incorporated in 2017, recently acquired at least a 5% stake in CCB.
According to its website, ORA is controlled by its founder and group adviser Datuk David Goh. “From its humble beginnings as a passionate automobile collector and distributor, today Open Road Asia is at the forefront of all major sectors of the automotive industry, namely retailing, auto storage, financing and racing,” it said.
ORA is an “established collaboration partner with luxury automotive brands” such as AMG, Aston Martin, Bentley, Ferrari, Jaguar, Land Rover, Mercedes-Benz, Porsche, Rolls-Royce and Proton, it added.
At end-March, it was reported that ORA and Permodalan Kedah Bhd had inked a joint-venture agreement to develop a premier tourist and motorsport destination in Malaysia — the OPen Road International Circuit (ORIC) and Integrated Resorts (IR) on the resort island of Langkawi. Goh reportedly said the project would have a gross development value of RM1.3 billion.
The ORIC will be developed on a tract of 183 acres of sea-facing land in Bukit Malut and will include a motorsport circuit. The IR will be a fully integrated resort consisting of luxury residential properties, retail outlets, five-star hotels, 4S automobile dealerships, petrol refuelling stations and a 900-car storage facility, as well as various tourist attractions and restaurants.
“The announcement of the substantial shareholding will be made on Monday. With this block in hand, Jardine CCL can kiss the [privatisation] deal goodbye,” says a source.
“Jardine CCL could still try to take CCB private by way of voluntary delisting, but it would need to get shareholders’ approval at an extraordinary general meeting (EGM), which is another story. But as it is, a full privatisation or compulsory acquisition is not possible,” another source observes.
To trigger a compulsory share acquisition and take the listed company private, Jardine CCL is required to hold 90% of the shares it did not already own at the time the takeover offer was launched. A back-of-the-envelope calculation shows that Jardine CCL, which had a 59.1% stake in CCB before launching the takeover, would need to garner another 36.81% equity interest (90% of the remaining 40.9% stake). Simply put, it has to achieve a total shareholding of 95.91% to complete a full privatisation exercise.
Now, if ORA has indeed acquired a substantial stake in CCB and does not accept Jardine CCL’s offer, a full privatisation will not materialise.
Having said that, with control of more than 75% of the company, Jardine CCL could seek a voluntary withdrawal of CCB’s listing as it would not be in compliance with the public shareholding spread requirement. Bursa Malaysia’s framework comes with a stringent three-tier shareholder approval requirement, whereby the withdrawal of listing must be approved by the majority of shareholders present and voting.
Moreover, objections must not be more than 10% of the total number of issued securities held by the shareholders present and voting. Via the dissenting vote of 10%, minority shareholders can collectively reject the privatisation proposal if they do not deem the withdrawal of its listing status or exit offer favourable to them.
To recap, in March, Jardine CCL made a fresh bid to privatise CCB — one of the country’s largest dealers of Mercedes-Benz vehicles — at RM2.40 per share or RM241.79 million. The deadline for the takeover offer was initially extended from April 28 to May 12, before being further extended to May 21.
Jardine CCL is part of the sprawling empire of British family-owned Asian conglomerate Jardine Matheson Holdings Ltd. In November 2019, Jardine CCL made its first attempt to take CCB private — via a selective capital reduction (SCR) exercise and repayment of RM2.20 per share.
Notably, the minority shareholders of CCB successfully blocked the SCR deal, with Jardine CCL failing to meet any of the three requirements needed to take the company private. At the EGM in February last year, 13.18% of the voting shares voted against the resolution. To be passed, the resolution must not be voted against by more than 10% of the votes attached to all the disinterested shares of the total voting shares of CCB.
Furthermore, based on the poll results, the number of disinterested shareholders who voted for the resolution stood at 46.22%, which is less than the minimum requirement of a simple majority in order for the resolution to pass. Also, the 57.94% in terms of value that voted for the resolution was short of the required 75%.
In its second privatisation bid, Jardine CCL stressed that the offer price of RM2.40 per share was final and that the offeror would not revise the price, according to a filing with Bursa Malaysia.
In view of CCB’s shares having been traded above the offer price of RM2.40 since the privatisation deal was announced, the emergence of a new substantial shareholder should not come as a big surprise. It was clear that some parties had been accumulating CCB shares, possibly with the intention of blocking the deal, as Jardine CCL is not allowed to buy the shares at above RM2.40.
On March 19 — two days after the takeover offer was proposed — the stock shot up to an intraday high of RM2.48.
Logically, minority shareholders who wish to cash out would sell their shares on the open market rather than accept the offer made by Jardine CCL.
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