Jardine Strategics Holdings

[opmi]

IIRC somewhere in the judgment for Kingboard Copperfoil lawsuit is that courts/precedents think the market price is the fair value for the shares in an "appraisal rights" situation.

Which I think is dumb.

[specuvestor]

agree with the observation of different strokes for different folks. Long funds are not equipped for prolonged or aggressive tactics.

Also an observation of the elephant in the room: JS was created in the 80s to prevent hostile takeover which in itself is not pro-shareholders per se. So it's a bit interesting to see chatters of maximising shareholders' value with the taipans whose emblem is the poppy plant though I personally think they have done well in capital allocation since shifting to SGX

Jardine Matheson Holdings behaved exactly like how big conglomerate would behave. Any expectation of management yielding to smaller stakeholders is wishful thinking. And for that matter minority shareholders who expects high corporate governance will be sorely disappointed and frustrated most of the time, irregardless of the company they hold. Having lower expectations is the secret to a happier and perhaps more fruitful investment journey. 

Hi Big Toe,

I disagree with you here. Many JSH minorities are not small time shareholders as you have seen in many mid to small cap stocks listed on SGX. This is because JSH is a STI index stock, so most passive and actively managed funds invested in it. These institution investors are not small time retail investors. They are managing millions and billions of dollars on behalf of their clients. They certainly have the resources to take JMH to the Bermuda court and fight for a better price for JSH. The question is whether they are willing to take up this option as the process might be long drawn and it benefits neither party.

And due to the cross holding structure, many of these funds are actually shareholders of JMH as well. So, do JMH want to sour its relationship with these investors?

As to ongweehiang obeservations, I really have no answer to his questions. But based on both JMH and JSH price movements, if you really want me to guess, I think the market is pricing in a happy ending for both companies. That is, a slightly higher JSH amalgamation price to satisfy JSH minorities and JMH shareholders will still benefit from it.

From my experience many years ago, the traditional fund families (e.g. Schroders, Aberdeen, Fidelity, T Rowe) generally have little interest in squeezing out the last cents. To them, once the takeover is announced, the bulk of returns is already secured.

Some of them don't even stay around till the deal's completion, preferring to sell to the market because they do not want to take on the deal risk. This is partly why you see a sudden surge in volume after the announcement. There's an exchange of risk between the long-only guys and the merger arbitrage guys.

The ones that do care are probably the activist funds, but those funds have a smaller presence in Asia (as of now). Also doesn't help that shareholding structure in Asia tends to be a lot more concentrated than in the US (in the States, just holding 5% stake is a really big deal in most cases because of the fragmented shareholding structure). So activist funds may find it harder here. Maybe as they gain popularity, we will start to see more push-back. Just my two cents.

[opmi]

Dont hope for pro-shareholders controlling shareholders. Just hope for alignment of interests.

Just monitor when will interests diverge. same in business and politics too.

All of us here knows of companies that pays nice dividends until chut patterns. can name at least 4 off hand...

Traditional long funds are useless in takeover offeror. They cannot fight too hard and end up price drops if offer lapses.  At most KPKB a bit to raise the prices. Can see that recently.

[ghchua]

Traditional long funds are useless in takeover offeror. They cannot fight too hard and end up price drops if offer lapses.  At most KPKB a bit to raise the prices. Can see that recently.

Hi opmi,

I think your post is referring to general takeover offers, and not specific to this JSH case? Because in this case, the amalgamation will surely go through as it needs only 75% of the votes and JMH already owned nearly 85% of JSH. There is little risk that this amalgamation will lapse.

For those who intend to fight for a better price via Bermuda court, there is only upside and no downside. Your JSH shares will be amalgamated at US$33 per share. Just take the offer price first and then fight it out to see whether you can get more. Its a simple decision for institutional investors.

For small retail investors, it is a bit more difficult. As you can see from the SIAS statement, we need at least a certain amount of money at stake so that it is worth the legal costs. Otherwise, it is not worth it.

[Shiyi]

Traditional long funds are useless in takeover offeror. They cannot fight too hard and end up price drops if offer lapses.  At most KPKB a bit to raise the prices. Can see that recently.

Hi opmi,

I think your post is referring to general takeover offers, and not specific to this JSH case? Because in this case, the amalgamation will surely go through as it needs only 75% of the votes and JMH already owned nearly 85% of JSH. There is little risk that this amalgamation will lapse.

For those who intend to fight for a better price via Bermuda court, there is only upside and no downside. Your JSH shares will be amalgamated at US$33 per share. Just take the offer price first and then fight it out to see whether you can get more. Its a simple decision for institutional investors.

For small retail investors, it is a bit more difficult. As you can see from the SIAS statement, we need at least a certain amount of money at stake so that it is worth the legal costs. Otherwise, it is not worth it.

Should the Bermuda court make a judgment in favour of the dissenting shareholders, will the retail investor stand to benefit even that he is not a party in the lawsuit?

[ghchua]

Should the Bermuda court make a judgment in favour of the dissenting shareholders, will the retail investor stand to benefit even that he is not a party in the lawsuit?

The answer is no. If you did not make an application to Bermuda court, you are not a dissenting shareholder. You are a satisfied shareholder who is happy with the price being offered by JMH.

[specuvestor]

Good summary in Bloomberg Opinion:

What’s particularly galling for minority investors is that the buyout is effectively a done deal, with Jardine Matheson able to vote its 85% stake in Jardine Strategic at next month’s shareholder meeting, rendering any objections moot. The 189-year-old group’s engineering of that situation, to the advantage of the controlling Keswick family, is a master class in how to maneuver through the gaps in transnational governance, and one that may raise questions for regulators from London to Singapore and beyond.
In Hong Kong, where the Jardines companies were listed until 1994 and where the group still has its operational headquarters, a related-party transaction of this nature would require approval by minority investors, with the controlling shareholder abstaining. The listing rules are similar in Singapore, where most trading in the Jardines companies takes place. However, these listings are secondary, so the rules don’t apply, the theory being that the main regulator should be where a company has its primary listing. That is London. But in 2014, the Jardines companies downgradedtheir U.K. listing status from “premium” (as primary is now known) to “standard” (formerly secondary), weakening minority shareholder protections. The group made the switch shortly before a rule change that would have made the downgrade itself subject to independent shareholder approval. Meanwhile, company law in Bermuda, to which the group moved its place of incorporation in the 1980s, also allows Jardine Matheson to vote its stake.
The buyout is “regulatory arbitrage at its finest,” according to Justin Tang, head of Asian research for investment advisory firm United First Partners in Singapore.

-SNIP-

Arguably, minorities should have seen what was coming. Hong Kong-based independent shareholder activist David Webb wrote critically, and prophetically, of Jardines’ U.K. listing downgrade in 2014, noting the possibility of investors facing a “Hobson’s choice” buyout offer. “Jardine Group has been expert at exploiting loopholes,” Webb said in an email Monday. The U.K.’s “standard” listing rules “are not fit for purpose, because they permit this behavior,” he said.

agree with the observation of different strokes for different folks. Long funds are not equipped for prolonged or aggressive tactics.

Also an observation of the elephant in the room: JS was created in the 80s to prevent hostile takeover which in itself is not pro-shareholders per se. So it's a bit interesting to see chatters of maximising shareholders' value with the taipans whose emblem is the poppy plant though I personally think they have done well in capital allocation since shifting to SGX