On 15 June 2022, Cocoaland Holdings Berhad (“Cocoaland”) published an announcement on Bursa Malaysia’s website stating its intention to present a takeover offer from Fraser & Neave Holdings Berhad (“F&N”) to it’s shareholders for consideration. Further to the announcement, F&N proposes to privatise Cocoaland by buying the remaining shares that it does not hold. We set out below an overview of the privatisation of companies in Malaysia:
WHAT IS PRIVATISATION?
Privatisation refers to a change of status from public ownership to private ownership. A company that goes from public to private will also be de-listed from the public exchange on which its shares are traded.
For Malaysia, public listed companies will be delisted from Bursa Malaysia. Delisted companies will no longer be under the regulatory purview of Bursa Malaysia, and will no longer be answerable to public shareholders.
THE PRIVATISATION OF COCOALAND
F&N proposes to pay RM 488.15 million for the remaining 72.34% shares in Cocoaland and intends to delist Cocoaland from the Main Market of Bursa Malaysia upon completion of the proposed privatisation.
The proposed privatisation is to be undertaken by way of a members’ scheme of arrangement under section 366 of the Companies Act 2016. The scheme must:
- be approved by more than 50% of the total number of shareholders of Cocoaland;
- be approved by at least 75% of the remaining shareholders of Cocoaland other than F&N; and
- not be rejected by more than 10% of the shareholders of Cocoaland.
WHY DO COMPANIES GO PRIVATE?
Among the main reasons public listed companies go private include:
- Strategic move: if the majority shareholder(s) of the company believes that the company’s shares are trading below its intrinsic value, a privatisation exercise will pave the way for such shareholder to purchase the remaining shares at a favourable price and later unlock such value after delisting.
- Capital savings: the compliance costs associated with being a publicly listed company are substantial, which includes the costs of raising additional capital, costs of an ongoing investor relations programme and annual listing fees payable to Bursa Malaysia. Hence, Malaysian listed companies tend to go private to save money and reward its shareholders with higher earnings per share.
- Regulatory concerns: Bursa Malaysia imposes extensive listing criteria and minimum requirements for companies to remain listed. For example, Bursa Malaysia imposes a minimum share price, minimum market capitalisation and periodic financial reporting requirements. Going private will allow a company to restructure its operations without the strict regulatory oversight imposed on publicly listed companies.
Get in touch with us if you have any questions on privatisation of public companies in Malaysia! We regularly advise companies on corporate restructuring and investment / funding exercises.