The Philippine Stock Exchange (PSE) has challenged agricultural products distributor Calata Corp. to make a tender offer to give small investors a chance to exit the beleaguered company, adding that its proposal to be the backdoor listing vehicle of seafood trader Millennium Ocean Star Corporation (MOSC) was “not workable.”
About 73.5 percent of Calata’s shares are owned by the investing public, mostly small shareholders.
Asked for updates on Calata’s delisting on the sidelines of the Shareholders Association of the Philippines (SharePHIL) forum on Monday, PSE president Ramon Monzon said the proposal involving MOSC was “not workable.”
However, he added that the PSE would be willing to “bend backwards” if Calata would make a tender offer to its small shareholders. He noted that Calata could use its retained earnings to launch such a tender offer.
“If you are really concerned for the small shareholders, I told them that PSE is going to bend its rules. We won’t make it involuntary (delisting). We will make it voluntary so you can come back anytime. But you do a tender offer,” Monzon said.
Involuntary delisting in PSE carries harsher sanctions compared to voluntary delisting. Once involuntarily delisted, Calata cannot apply to be included in the local bourse again within a period of five years. Furthermore, its directors and executive officers are disqualified from sitting as directors or executive officers of any company applying for listing within the same five-year period.
Monzon explained that the proposal involving the unit of another listed company, Millennium Global Holdings Inc. (MGHI), was not possible.
Under the proposal, Calata will spin off its existing agribusiness to Agriphil Corporation, a private entity. Calata will then cede the listed entity to Millennium Global Holdings Inc. (MGHI), giving the latter 81 percent of the company’s ownership.
“First, they are assuming that SEC (Securities and Exchange Commission) will approve their increase in capital stock. I don’t think so. Second, to be able to sell substantially all of their shares—transfer shares to Agritech—you need consent from 67-percent vote,” Monzon said.
With small shareholders already owning more than two-thirds of Calata shares, Monzon doubted they would be agreeing to sell the company to MGHI and have their cumulative shares diluted to around 8 percent.
Monzon also noted that the company that was supposed to take over—MGHI—was likewise a publicly listed entity.
“That is a holding company that’s not doing anything and their only activity is owning a subsidiary, that Millenium Seafood. If you transfer that to Calata, there will be chain listing and that’s against the rules,” he said.
Chain listing, which is prohibited by PSE, refers to the listing of multiple companies with substantially the same assets.
“We need to set a realistic (option),” Monzon said, adding that Calata could use its retained earnings to buy out small shareholders.