Mar 24, 2014

    Rights issue: Poser over irrevocable undertaking

    MARKET watchers were puzzled on Friday after Unionmet, a Chinese maker and supplier of indium, released the results of its recent rights issue in which there was no mention or sign of an irrevocable undertaking given earlier by a substantial shareholder.

    "It's very odd that the company says a substantial shareholder has backed the issue and then a month later - nothing," said a dealer. "It looks very much like the shareholder did not take up its allotment."

    Unionmet first proposed its one-for-two renounceable, non-underwritten rights issue on Jan 11, when it set a price of 7.5 cents per rights share, a 3.8 per cent discount to the closing price on Jan 10 of 7.8 cents, and a discount of about 2.6 per cent to the theoretical ex-rights trading price of 7.7 cents.

    This price was revised on Feb 12 to 6.5 cents and, on Feb 19, the company said substantial shareholder Weng Huixin - who is deemed to have an interest in 175.8 million Unionmet shares held through her 100 per cent owned vehicle, Precious Stream Holdings (PSH) - had given an irrevocable undertaking that PSH would take up its rights entitlement.

    The company also said another substantial shareholder, Bestway Premium Investments (BPI), had expressed interest in subscribing for the issue and that Unionmet was waiting for BPI to say whether it would issue a letter of confirmation to this effect.

    Had the rights been fully subscribed, the company would have had to issue 306.8 million new shares, and would have raised about $19.6 million in net proceeds, of which $18 million was for its new property development and oil-blending businesses and the balance for working capital.

    On Thursday, Unionmet said it had received valid acceptances and excess applications for 56.6 million rights shares, which is only 18.44 per cent of the original hoped-for issue of 306.8 million, and said it expected the 56.6 million new shares to be ready for trading last Monday.

    No mention was made of Ms Weng's portion or how the gross proceeds of $3.7 million were to be divided. Neither was there any mention whether BPI had issued the letter of confirmation.

    "As far as the ordinary shareholder is concerned, the word 'irrevocable' means just that - it cannot be withdrawn," said a dealer. "So was it withdrawn and, if so, what about shareholders who subscribed because of the undertaking?"

    Calls and e-mail messages sent by The Business Times to the company were not answered. Singapore Exchange is understood to be aware of the matter.

    Unionmet manufactures and trades in non-ferrous metals comprising indium ingots and their related by-products.