*This story has been updated with the appointment of Vivienne Cheng as independent and non-executive director*
KUALA LUMPUR (Dec 7): Tropicana Corp Bhd announced a few boardroom changes today, including the resignation of an independent director and the redesignation of one to a senior independent director's post, while the company was asked to justify its recent acquisitions of over RM70 million worth of shares in Top Glove Corp Bhd.
In separate filings today, Tropicana said its independent and non-executive director Loh Chen Peng, 66, who is also a member of the group's risk and audit committees, has resigned from the board due to health issues, with effect from Dec 5.
Loh was replaced by Vivienne Cheng Chi Fan, 61, who was appointed to the board and also to the same committees. Her appointment took effect today. Cheng also sits on the board of Berjaya Corp Bhd, Berjaya Group Bhd and Cosway Corp Bhd.
At the same time, another independent director Datuk Tang Vee Mun, 47, has been made a senior independent director, also with effect from today.
Meanwhile, Tropicana also said it has been requested by the stock exchange to, among others, justify the rationale behind the group's purchases of 11.25 million Top Glove shares that it announced last Friday, given that the business is different from Tropicana's principal activities.
The bourse also wanted to know why Tropicana, which shares a common shareholder and chairman with Top Glove in Tan Sri Dr Lim Wee Chai, chose Top Glove over other glove companies. The group was also asked to elaborate on the prospects and risk factors of the acquisitions, given "the commercialisation of Covid-19 vaccine in the near future which may hamper the demand of gloves globally as well as the possible negative impact to the share prices of gloves companies including Top Glove".
In response, Tropicana said the Top Glove shares were transacted at prevailing market prices from the open market, in a series of acquisitions between July 15 and Dec 1, at between RM28.898 (before Top Glove's two-for-one bonus issue) and RM6.528 apiece. It also updated that the net consideration for the 11.25 million shares it bought was RM73.06 million, and not the RM78.47 million it previously announced last week.
It said Lim, who is the founder of Top Glove in which he controls a 25.68% stake — he is also among the top three substantial shareholders with an 11.07% stake in Tropicana — had voluntarily abstained from deliberating and voting for the acquisitions.
It also said the acquisitions were undertaken as part of its investment strategy to capitalise on the potential robust growth of Top Glove.
"The company has chosen to invest in Top Glove instead of other glove companies as Top Glove is the world's largest manufacturer of gloves. It currently captures approximately 26% of the world market share for rubber gloves. Top Glove has also demonstrated steady growth with a compound annual growth rate of 23.1% for revenue and 28.2% for profit after tax over the past 20 years," Tropicana said.
"The acquisitions allow the company to benefit from the prospects of the manufacturing and trading of gloves, which are largely contributed by the increased demand globally for gloves due to the ongoing Covid-19 pandemic and also the growth in the global healthcare services industry," it added.
Last Friday, The Edge reported that Tropicana's purchases of shares in Top Glove had raised questions about why it was buying into the group, whose share price had been declining, weighed by developments in the vaccine discovery space, and the surge of Covid-19 infections among its workers that had caused the temporary closures of 28 of its factories, or half its production capacity.
Shares in Tropicana slipped one sen or 1.14% to close at 87 sen today, giving the group a market capitalisation of RM1.2 billion.
Top Glove, which has spent more than RM1 billion to buy back its own shares since September as its share price retreats, ended the day at RM6.60, down five sen or 0.75% from the previous day's close for a market capitalisation of RM54.1 billion. While the stock has declined 25% since the start of September, it is still up 320% year-to-date.
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