Lay Hong private placement to address QL's increasing stake

PETALING JAYA: Lay Hong Bhd has defended its recently announced private placement as the right move to counter the accumulation of Lay Hong shares by QL Resources Bhd.
In a statement released yesterday, Lay Hong said the private placement, which is expected to raise nearly RM49 million, is an "enabling mandate" in view of QL's accumulation of Lay Hong shares.
QL holds 38.46% of Lay Hong, compared with Yap family's 44% stake.
Lay Hong also allayed concerns over the proposed private placement of up to 30% of its issued shares, saying it will not come in one shot and would provide a comfortable buffer for the group considering that it has to maintain and at least 25% public shareholding spread to remain listed.
"It should be noted that our current number of issued shares is only approximately 50 million and 30% would translate to merely approximately 15 million new shares," it said.
Lay Hong said it does not make sense to issue just enough to meet the current requirements as it then has to repeat the whole exercise of appointing advisers, preparing and making submissions to authorities and holding general meetings at the shareholders' costs each time it approaches the 75% threshold.
It believes the investment value of shareholders should be intact in the long term as the proceeds raised will be used to expand its business.
"We do not think there is erosion of shareholders value if all shareholders are diluted but the value of each share increases," it said in the statement.
Lay Hong noted that both local and foreign investors have shown interest on the private placement.
It also justified its stand of not allowing board representation by QL Resources Bhd, arguing that the two are direct competitors.
Lay Hong said if QL's nominated director was elected to the board, it would be detrimental to Lay Hong's minority shareholders' interests.
"One can easily imagine that at board meetings, some of the discussions and decision making at our board would be awkward and a little complex as Lay Hong's proprietary information and price-sensitive information has to be discussed in the presence of a direct competitor's representative and such information can be procured so easily by a competitor," Lay Hong noted.
To recap, QL executive director Chia Mak Hooi ceased to be a director of Lay Hong after he failed to be re-elected at the Lay Hong's AGM September last year.
Following that, QL launched a conditional voluntary takeover offer for associate company Lay Hong Bhd, at RM3.50 a share. However, the take over offer fell through as it fell short of the 50% acceptance threshold.