KUALA LUMPUR: ILB Group Bhd minority shareholder BT Investment Capital Ltd has taken the group to court in an attempt to prevent ILB’s board of directors from conducting certain transactions.
This came about following an announcement by ILB to fully fund a RM15.9 million proposed acquisition of nine parcels of commercial land with shoplots in Seksyen 19, Petaling Jaya, Selangor, via the issuance of 37.78 million new shares in ILB.
“The proposed issuance of the new shares will enlarge the number of issued shares to 232.81 million, from the current 195.03 million, which will dilute existing shareholding and does not create value for shareholders as ILB’s earnings per share and any dividends, rights, allotments or other distributions that ILB may declare will be negatively impacted. This dilution impact was announced by the board on July 15, 2022 on Bursa Securities,” BT Investment said in a statement today.
At the same time, BT Investment said, the proposed transaction will create a new single largest shareholder in the form of the seller of the commercial parcel, Impian Nuri Sdn Bhd, which will have a 16.67% stake in ILB.
The proposed 37.78 million new shares are equivalent to 19.37% of the current share base of ILB, just under the 20% general mandate. ILB’s board cited the 20% general mandate for the proposed transaction, which was announced by Bursa Securities on April 16, 2020 as a way to provide a relief measure to public listed companies that need to raise capital in a timely and cost-effective manner to be injected as working capital or for operational expenditure to sustain the business during the pandemic. This interim measure was allowed until Dec 31, 2021 and was then extended to Dec 31, 2022.
“Contrary to the intention of this 20% general mandate, the proposed transaction does not result in funds being injected into the company, nor does ILB appear to need to raise cash as shown by its financial year ended Dec 31, 2021 annual report which recorded a cash and bank balance of RM86.03 million,” BT Investment said.
It said that ILB positions itself as active in the solar renewable energy business following the divestment of most of the group’s warehousing and logistics operations over the past few years. ILB cited a strategic plan to generate sustainable earnings (rental income) as the reason to acquire the commercial land – a move inconsistent with its core business focus.
“The commercial parcel only has an occupancy of 45% as announced by ILB. It yields RM324,600 return per annum for properties valued at RM16.2 million. This translates to a 2.2% gross revenue for ILB and does not make sound or sensible commercial reasoning for a proposed acquisition meant to provide substantive recurring income,” BT Investment said.
Currently, BT Investment holds a 11.2% stake in ILB which will be diluted to 9.33% not through any action of its own but purely through the proposed transaction.
“Directors have a duty to act in the best interest of shareholders. Regretfully, a minority shareholder such as us has to seek recourse in court to protect ours and the rights and interests of existing minority shareholders by seeking an injunction to restrain the proposed transaction from being executed,” said BT Investment.
At the same time, the minority shareholder intends to requisition for an EGM for shareholders to query the board on their rationale and proposes to revoke the 20% general mandate.
Defendants named in the lawsuit are ILB’s board of directors comprising Tee Tuan Sem, Datuk Karownakaran @ Karunakaran Ramasamy, Makoto Takahashi, Wan Azfar Wan Annuar, Datuk Wan Hashim Wan Jusoh, Soh Eng Hooi and Jamilah Kamal, as well as the seller Impian Nuri Sdn Bhd, and ILB.
In response to a query from Bursa Malaysia Securities, ILB said it will always consider corporate proposals involving the businesses of the ILB Group in the best interest of ILB and all shareholders.
“The company is seeking legal advice and will announce further developments to the matter accordingly,” it told the stock exchange.
