Business Times - 04 Apr 2008


Jade Tech: some questions that need urgent answers

By R SIVANITHY

JUST a week ago, things looked pretty straightforward for anyone who bought shares of Catalist-listed Jade Technologies.

The company's major shareholder and director Anthony Soh had offered 22.5 cents a share for the 53.5 per cent of Jade he did not own via his investment vehicle Asia Pacific Links (APL). And since the letter to shareholders - prepared by financial adviser OCBC Bank - said the offer would become unconditional if APL obtained control of at least 50 per cent of Jade, everyone assumed it would be a done deal since Dr Soh already held 46.5 per cent.

One week later, it looks like the takeover could be called off. Shareholders have been shocked by news that APL had pledged shares representing about 30.47 per cent of Jade to Australian stockbroker Opes Prime for financing - a deal that has surfaced only now because Opes has been declared bankrupt.

As a result, the ownership of the 30.47 per cent of Jade is in dispute. The shares have been seized by Opes's official receiver in Australia, which means APL may own just 16.06 per cent of Jade and not the 46.5 per cent stated in the takeover offer.

If so, Dr Soh said in a letter to Jade on Tuesday, APL may not have sufficient resources to complete the takeover. If this is confirmed and the deal is called off, Jade's shares could crash back to where they were before their pre-take- over run-up - possibly around 10 cents.

This is the grim scenario that confronts Jade shareholders. So, understandably, they are anxious to have their questions answered as quickly as possible.

Not helping matters is news that OCBC has resigned as Jade's takeover adviser and that APL is looking for a replacement.

First - and perhaps most important - why did OCBC resign? Can a financial adviser resign or is there some sort of obligation - moral, fiduciary or otherwise - to stay the course, even if problems arise?

A worried Jade shareholder told BT: 'When I saw it was a solid name like OCBC and not a smaller, lesser-known company doing the deal, it gave me confidence to accept the offer. How can they just walk away like this and leave us hanging?'

Second, does the pledging of a large portion of Jade's shares to a third party in a foreign country constitute material information that should have been disclosed in the March 8 letter to shareholders? Was OCBC aware of this pledge in the first place?

Third, what rights do shareholders have if they have relied on an offer document that may have been inaccurate or incomplete?

The sentence relating to Dr Soh's presumed ownership of 46.5 per cent on March 8 read: 'At the latest practicable date, the offeror (APL) and parties acting in concert with it hold 451,272,504 shares, representing 46.55 per cent of the shares.'

Most shareholders would have assumed that 'hold' means 'own'. According to Dr Soh, he too believed he still owned the shares. Problem is, no one knows if this is the case. Much hinges on whether legally it is actually the case, or whether pledged shares can be seized by a receiver if the financier goes under.

Fourth, did the market somehow get wind of Opes's bankruptcy and Jade's involvement ahead of Tuesday, which is when Jade first made an announcement on the matter? If so, could the announcement have been made earlier?

Trading in Jade's shares progressively surged last week - from only 686,000 on Wednesday to 1.46 million on Thursday, 15.9 million on Friday and 55 million on Monday this week to a whopping 196 million on Tuesday before trading was halted. Since the first news reports of Opes's problems appeared in Australian newspapers last Friday, it looked very much like the market knew something was brewing. So why was no announcement made last Friday, or even on Monday?

As things stand now, the deal looks like being scuttled unless a competing bidder can be found - one who sees the same value in Jade as Dr Soh did. This may not be easy.

Recall that one of the reasons for the takeover offer was that Dr Soh had confidence in Jade's potentially lucrative coal mining concession in Indonesia.

However, in a report to Jade's independent directors, independent adviser CIMB-GK warned: 'There is, however, no assurance that the company will be able to execute the mining services agreement effectively.' It cited Jade's lack of a track record in coal mining and the need for sufficient funding.

All told, it is clear that most of the grey areas surrounding this convoluted saga hinge on legal questions that few people are equipped to answer - at least authoritatively.

Still, let's hope the relevant parties act swiftly to shed light on what has become one of the most controversial takeover bids in local corporate history.

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.