New Magnus major shareholder supports current board: CEO
Magnus, an energy equipment and production company,
announced on Monday that one Lee Chin Cheh raised his direct and deemed stake
to 24.58 per cent by buying 680 million shares, or a 22.14 per cent stake, for
S$2.04 million or 0.3 Singapore cent apiece. Magnus shares closed at 0.3
Singapore cent on Tuesday.
Comments
Kenneth Lim
27 April 2016
Minority shareholders of Magnus Energy who are trying to oust the company's current directors expect to lose the fight after the surprising emergence of a new substantial shareholder that the company says supports the existing board.
Magnus, an energy equipment and production company, announced on Monday that one Lee Chin Cheh raised his direct and deemed stake to 24.58 per cent by buying 680 million shares, or a 22.14 per cent stake, for S$2.04 million or 0.3 Singapore cent apiece. Magnus shares closed at 0.3 Singapore cent on Tuesday.
Mr Lee bought his shares from Value Capital Asset Management, a fund that holds Magnus-issued convertible bonds that may be converted into Magnus stock at a 10 per cent discount to recent prices. Those bonds are part of a three-tranche deal between Premier Equity Fund and Magnus. Value Capital Asset Management is the investment manager for Premier Equity Fund.
The emergence of Mr Lee, a Malaysian investor and politician, is very timely, given that Magnus's shareholders will meet at an extraordinary general meeting on Friday after a group of disgruntled minority shareholders sought a vote to remove the current directors. Mr Lee's newly acquired shares make him the single largest shareholder of Magnus.
Magnus Energy chief executive Luke Ho said he has had contact with Mr Lee.
"He has expressed his confidence and faith in the current board and management," Mr Ho told The Business Times.
Lawyer Lim Chee San, who is one of the nominees proposed by the requisitioning shareholders to replace the current board, said the requisitioning shareholders are not hopeful of victory.
"Lee Chin Cheh is not associated with the requisitioning shareholders, as far as we know," Mr Lim said. "Hence, we are not hopeful of succeeding at this Friday's EGM."
The 11 requisitioning shareholders - who held about 11.16 per cent of Magnus shares before the latest dilution by Value Capital's conversion of bonds into stock - are seeking to remove all four Magnus directors because of unhappiness with the "relentless issuance of convertible notes".
In the place of the current directors, the requisitioning shareholders wish to appoint Mr Lim, accountant Paul Go, and investor and businessman Steven Liu Yongqiang to the board.
Mr Lim said the proposed directors have yet to form a firm plan for the company without better access to information about the business.
"Although it is very likely that, if we do form the board, we will not activate the third tranche of the S$35 million convertible notes and may even try to negotiate cancellation of the unsubscribed portion of the second tranche of convertible notes. Also, if we do form the board, we will not waste any time in formulating a good plan for the company."
Mr Ho said the convertible bonds are essential.
"The board and management are seeking to grow the group by expanding on its existing business and to develop new business segments," he said. "This requires funding, both for capital investments and working capital. Funds from the convertible bonds have been used to fund these investments and working capital, and we can increase our profitability and returns only if we invest sufficiently in these businesses."