THERE ARE certain interesting parts in the circular that Global Yellow Pages recently sent to its shareholders.
The circular, dated July 11, was uploaded to the SGX website yesterday in connection with an EGM of Global Yellow Pages on July 26 for shareholders to vote on two resolutions:
>> The proposed acquisition of equity interest in Yamada Green Resources Limited (from Hydrex International - a special purpose vehicle owned by Sam Goi and angel investor Koh Boon Hwee).
>> The proposed share swap of 41,122,305 shares in Yamada Green Resources Limited representing 8.25% equity interest in Yamada Green Resources Limited with 82,244,610 new shares representing 12.06% of the enlarged share capital of the company.
Global Yellow Pages said in its circular: "The Company believes that the Proposed Acquisition and the Proposed Share Swap is a strategic investment into the food business which will bring substantial benefits to the Company and the Shareholders as Yamada is highly diversified by sector and geography."
(So the company explicitly says it believes there will be "substantial benefits" to the company and its shareholders. However, one would find the reason given ("as Yamada is highly diversified by sector and geography") is not convincing since it does not follow that the diversification will bring "substantial benefits" for shareholders. One can read the rest of the circular and learn more about Yamada's business from other publications to make a more informed judgement of whether Yamada can bring substantial benefits not only to Global Yellow Pages shareholders but also to its own shareholders.)
Global Yellow Pages currently owns 15.647 million shares of Yamada, or a 3.14% stake, which were bought on the open market in recent months.
Yamada operates one of the largest shiitake mushroom cultivation bases in Fujian province in China.
Its FY2012 (ended June 2012) net profit was S$28.64 million while it reported 9MFY2013 profit of S$14.17 million.
Signalling its interest in buying more Yamada shares, Global Yellow Pages also said: "The Company may make further on-market purchases of Yamada Shares during the period between the Latest Practicable Date and the date of the Proposed Acquisition and Proposed Share Swap EGM and will provide an update by way of announcements on SGXNet."
("Latest Practicable Date" refers to 1 July 2013, which is prior to the printing of the circular)
The following text in italics is excerpted from the Global Yellow Pages circular:
Further Acquisitions of Yamada Shares
The Company may from time to time acquire Yamada Shares as the Directors of the Company deem appropriate subject to applicable rules and regulations. The current intention of the Company is not to trigger any obligation under the Code to make any general offer for all the shares of Yamada.
Shareholders’ approval of Ordinary Resolution 1 is not conditional on Shareholders’ approval of Ordinary Resolution 2 and vice versa.
Shareholders are to note that if Ordinary Resolution 1 is not approved, the Company will not be able to complete the Proposed Acquisition. If Ordinary Resolution 2 is not approved, the Company will not be able to complete the Proposed Share Swap.
However, if either Ordinary Resolution 1 or Ordinary Resolution 2 is approved by the Shareholders, it will give the Company the necessary authority to acquire more Yamada Shares (subject to applicable rules and regulations) up to the relevant thresholds for very substantial acquisitions or reverse takeover transactions as set out Chapter 10 of the Listing Manual (not exceeding 100% of the relative values of Rule 1006 (other than Rule 1006 (b) – profit test) of the Listing Manual or which result in a change of control of the Company).
In the event any of the relative values of Rule 1006 (other than Rule 1006 (b) – profit test) exceed 100% or if the future acquisitions (including but not limited to on market purchases) of Yamada Shares result in a change of control of the Company, the Company will have to comply with the requirements of Rule 1015 of the Listing Manual.
Global Yellow Pages will own 19.87% of Yamada if the two resolutions are approved by shareholders at the EGM. In its circular, Global Yellow Pages has also highlighted risks associated with investing in Yamada.
For the full 36-page circular posted on the SGX website, click here.
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