SINGAPORE (Sept 27): In response to queries from Singapore Exchange Regulation (SGX RegCo), engineering firm DLF Holdings said founder Fan Chee Seng believes the offer price of 8.1 cents per share he received in a sale and purchase agreement (SPA) was “reasonable”.

Under the Sept 20 agreement, QRC, a consultancy solely owned by one Enomoto Hiroyuki, had acquired a 57.16% stake in the company for $5.6 million, or 8.1 cents per share. This comprised 45 million shares from DLF's former chief executive Wong Ming Kwong and 24.2 million shares from Fan.

The acquisition triggered an 8.1-cent mandatory takeover offer by QRC.

QRC's offer price represented a steep 54.5% discount from DLF's volume-weighted average price (VWAP) of 17.8 cents for the month up to Sept 5, and a smaller 29.6% discount and 4.71% discounts to the one-year and six-month VWAPs respectively.

SGX RegCo queried DLF on Sept 23, asking the company to explain why both Wong and Fan had entered into the SPA with QRC to sell their shares at 8.1 cents. This constituted “important information for shareholders in deciding whether to accept the offer,” the regulator said.

On Sept 26, SGX RegCo followed up with a notice of compliance (NOC), ordering DLF to respond to its queries on Sept 23, including the rationale and intention behind the Sept 20 SPA.

The regulator also instructed DLF’s independent directors to scrutinise the bases taken into consideration by the independent financial advisors in arriving at an opinion on the offer.

See: SGX hits DLF with notice of compliance linked to SPA that triggered mandatory offer

In a filing to SGX on Sept 26, just over three hours after receiving the NOC, the company noted that its balance sheet and income have “deteriorated significantly” since its IPO. DLF reported a loss of $5.7 million for the six months ended June, compared to a profit of $1.8 million for the same period in the preceding year. Its net asset value (NAV) per share was also noted to have plunged 90% to $0.0045 as at end June, compared to $0.0515 as at end December, or five months after its listing.

“Based on the above factors, Mr Fan feels that the offer price of $0.081 is reasonable especially considering the illiquidity of this stock. As such he has entered into the SPA on a willing buyer, willing seller basis,” the company added. “[Fan] feels that this mandatory unconditional cash offer gives minorities an opportunity for those who want to exit in view of the recent poor financial results and illiquidity of the stock.”

The group noted that QRC had approached Fan in early September, but Fan did not agree to sell his shares at that time. “It was not until 20 September that both sides agreed on the price of $0.081,” said DLF. 

DLF added that when QRC approached Fan, he and Wong had not been on good terms for some time. The company said that none of the directors in the company, including Fan, has spoken to Wong since May this year. As such, the company said it could not comment on Wong’s rationale to enter into the SPA to dispose of his interests.

According to DLF, there are no relationships – business or otherwise – between QRC and the group. 

In response to the exchange’s query regarding the key projects on the group’s hands, DLF cited contracts and ongoing works at Sengkang General Hospital, Tanglin Club, Sheraton Towers and Woodlands Hospital. 

As at 4.18pm, shares in DLF Holdings are trading flat at 18.5 cents.