C.K. Tang Limited is a Singapore-based company founded by Tang Choon Keng in 1932. The company is in the business of departmental store retailing and ...
This paper describes about the corporate governance failure issues in CK Tank.
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ABOUT C.K. TANG C.K. Tang Limited is a Singapore-based company founded by Tang Choon Keng in 1932. The company is in the business of departmental store retailing and general merchandising. Since 19!" the company has been operating at its flagship building" Tangs #la$a" along %rchard &oad. C.K. Tang is a company characteri$ed by the presence of a ma'or controlling shareholder. (or e)ample" in *une 2++3" then C,%-Chairman Tang ee Sung" the second son of the founder" oned /9.9 per cent of the company0s shares2. n 19" C.K. Tang as listed on the then Singapore Stoc ,)change" hich later became the Singapore ,)change 4S567. 8oeer" since 2++3" the Tang family had been trying to delist and priati$e the company:. ;fter to failed attempts" the Tang Tang family finally succeeded and the company as delisted on 2: ;ugust 2++9. n 2+11" C.K. Tang made an offer to about ++ minority shareholders ho had held on to the shares of the delisted company. This offer represented a 1 per cent premium oer its fair alue and ell aboe the price offered to other shareholders for the delisting in 2++9. 8oeer" some of these minority shareholders ere still unilling to tae up the share buybac offer" and ere holding out for a better offer/. BOARD OF DIRECTORS
ith this deelopment" for the first time in the company0s history" there as no Tang family member on the board. ;ccording to C.K. Tang0s Corporate 5oernance &eport in 2++9" the board ould be responsible for enhancing long-term shareholder alue and the oerall
management of the 5roup. This includes reieing the 5roup0s performance" approal of corporate strategies and promoting high standards of corporate goernance. The board delegated some of its functions to the board committees" namely the audit committee" nominating committee and remuneration committee. FIRST PRIVATIZATION ATTEMPT: SCHEME OF ARRANGEMENT
%n 29 %ctober 2++3" Tang ee Sung offered minority shareholders S=+.:2 per share ia a scheme of arrangement9. This represented a premium of about 3 per cent aboe the aerage closing price oer the last fie trading days1+. This price also meant a 19.2 per cent discount against the company0s net tangible assets as at 3+ September 2++211. 8oeer" the resolution failed to pass" as the shareholders felt the offer price as too lo and anted more information on the company0s prospects12. SECOND PRIVATIZATION ATTEMPT: UNCONDITIONAL CASH OFFER
n ually controlled by the brothers. This second attempt as in the form of a oluntary unconditional cash offer1:. The S=+./ per share offer reflected a 1/.1 per cent premium to C.K. Tang0s latest closing price at that time. t also represented a 9.: per cent premium to the company0s net asset alue" based on its annual report for the financial year ending 31 ?arch 2++/1. hen the offer deadline e)pired" insufficient acceptances had been receied1/. The reason as idely belieed to be the underaluation of the commercial property Tangs #la$a1. ;s a result" the company continued its listing on S56. %n 1 *uly 2++!" at an ;nnual 5eneral ?eeting 4;5?7" minority shareholders >uestioned the board about the company0s financial losses" as ell as its plans to delist the company from S56. The board declared that a priati$ation e)ercise is solely the decision of the ma'ority shareholder. The board said it oed a fiduciary duty to shareholders" hich is to loo after the business of the company.1! ;ttempts to ote against standard resolutions such as adance payment of directors0 fees ere defeated" because of the Tang family0s ma'ority holdings19. THIRD PRIVATIZATION ATTEMPT: VOLUNTARY DELISTING
%n ! ?ay 2++9" the Tang brothers made their third priati$ation attempt through an inestment holding ehicle" Tang @nityThree" hich submitted a delisting proposal to the company. The
remaining shareholders ere offered S=+.!3 per share2+" hich represented a 22 per cent premium oer the company0s last traded share price of S=+./! prior to the offer" and a 21 per cent discount to the firm0s net asset per share price of S=1.+ as of 31 uestioned if the offer as reasonable" gien that the shares had closed at a price aboe the offer at that point in time. Aonetheless" the board retained its recommendation" saying that maret prices typically aried23. This as despite earlier statements by the Tangs saying that the priati$ation offer as to allo shareholders to moneti$e the alue of their inestments at a premium oer its historical trading prices2:. Shareholders also reproached the directors for failing to clarify ith the Tangs about their redeelopment plans for Tangs #la$a after its priati$ation. They e)pressed disappointment ith the independent directors" saying that they had insufficiently analy$ed the issue. C.K.TANG: THE FIGHT TOWARDS PRIVATISATION 10
uestion" but this fact as irreleant as ell ;nother shareholder called for a ote of no-confidence against the board chairman. ;fter consulting ith legal adisors" the board re'ected the motion" ith the chairman saying that the action as an attempt to frustrate the meeting2!. ,en as shareholders tried to probe further" the chairman called for the ote to be taen29. The resolution to priati$e the company as passed ith 9/.2 per cent of otes in faor of the proposal K EY AREA OF CONTROVERSY: TANGS PLAZA
The Singapore Code on Taeoers and ?ergers 4the Code7 goerns all taeoer actiity in Singapore inoling public companies. @nder &ule 2/.24a7 of the Code" Ba property hich is occupied for purposes of the business must be alued at the open maret alue for its e)isting use. 8oeer" &ule 2/.24c7 proides for the case in hich Bsuch a property is alued for an alternatie use. (or such a case" the costs of conersion andDor adaptation should be estimated
and shon 31. uired to put a redeelopment aluation on the report33. C.K.TANG: THE FIGHT TOWARDS PRIVATIZATION
#C stated that the property as alued at S=3:+ million on 2 ?ay 2++93:. This as much loer than other nearby sites. n contrast" minority shareholders contested that the site as easily orth at least S=:++ million" according to an independent aluer. This alue did not tae into account the potential alue arising from redeeloping the site" and did not consider the potential alue from sub-diiding the site into small retail units and leasing them to specialty tenants3. The board" hoeer" stated that regulators had told the directors that any such redeelopment as not applicable UNHAPPINESS AMONGST MINORITY SHAREHOLDERS
Seeral shareholders ere unhappy about the perceied underaluation of the Tangs #la$a site" as ell as the fact that the offer price as less than the company0s net asset per share. Thus" they met ith the Securities nestors ;ssociation 4Singapore7 4S;S7. S;S stated that it ob'ected to the e)it price and that the minority shareholders had been treated ith no dignity3!. S;S had also called for regulators to interene39. Ten shareholders had also signed a petition to S56 and the ?inistry of (inance >uestioning the basis of the aluation on the property0s Be)isting use:+" in a bid to conince the regulators to allo them to obtain an alternatie aluation report:1. S560s reply as that C.K. Tang0s moe to delist as purely commercial" and that the company had complied ith the listing and delisting rules THE CAPITAL R EDUCTION EXERCISE
%n 19 ;ugust 2+11" C.K. Tang embared on a capital reduction e)ercise to cancel out all remaining shares held by minority shareholders. C.K. Tang ould pay each inestor S=1.3+ per share" hich represents an increase of /./ per cent on the e)it offer in 2++9. #C had indicated that the S=1.3+ offer is 1 per cent aboe its fair maret alue:3. The rationale behind the
e)ercise as to reduce administratie burdens. ;dditionally" the company reaffirmed that there are no plans for the redeelopment of Tangs #la$a" and the buyout had no hidden agenda. C.K.TANG: THE FIGHT TOWARDS PRIVATIZATION
8oeer" only 39 per cent of the minority shareholders in attendance agreed to the price for the share buybac" far belo the per cent re>uired. Some minority shareholders cited the underaluation of the Tangs #la$a property as the reason for re'ecting the offer. C.K. Tang ould hae to do more to conince these shareholders for the buyout to succeed.
