Thursday 16 October 2008

Ex-Jade Boss Rapped

Regulators also take his advisers – his lawyer and OCBC – to task
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Ex-Jade Boss Rapped

Regulators also take his advisers – his lawyer and OCBC – to task

By Lee Su Shyan
15 October 2008

The Jade Technologies buyout debacle had a dramatic sequel yesterday when the man behind the takeover and his advisers - his lawyer and OCBC Bank - were rapped over the knuckles by regulators.

Former Jade president Anthony Soh, who engineered the takeover, has been barred by the Securities Industries Council (SIC) from making any takeover offers for five years from yesterday.

Dr Soh also cannot trade shares on the Singapore Exchange without SIC consent for three years, or serve as a director of any listed company for five years.

OCBC, which had been Dr Soh’s financial adviser, has also been taken to task. Its role was to confirm he had enough funds to complete the takeover and that his shareholding disclosure was correct.

SIC said it accepted that Dr Soh’s ‘reticence’ and rule breaches deprived the bank of the ability to detect the problems, but it had a ‘key responsibility’ to ensure that the takeover code was met.

The bank agreed, without admitting liability, to stay clear of such takeover work for six months from Sept1, although it had stopped accepting such work on April 11.

OCBC will also donate $1 million to sponsor public education programmes on fraud awareness.

Law firm Allen & Gledhill (A&G), which was working for Dr Soh, also came under the spotlight. It was not censured but the SIC noted deficiencies in its performance. A&G partner Steven Lo had stopped accepting new takeover work since April 11 and will do so for a further six months from Sept 1.

The SIC rulings stemmed from the attempted buyout early this year.

Many investors thought it was a sure-win deal when on Feb 18, Dr Soh, who owned 46.54 per cent of Jade, made a takeover offer for the rest of the stock at 22.5 cents per share. This was over the last traded price of 19.5 cents.

He needed only a few more acceptances to get to 50 per cent for the deal to succeed so many investors snapped up the shares, intending to get that extra three cents.

But on March 27, Melbourne broker Opes Prime crashed. On April 1, Dr Soh stunned investors by revealing that he had pledged much of his shares to Opes.

Opes’ creditors, including Merrill Lynch, had seized the stock to cover their debts, and that left Dr Soh with just 16 per cent of Jade and insufficient funds for the buyout. The shares plunged, catching out retail investors and hedge funds.

The stock has not recovered since and ended at 4.5 cents yesterday.

The takeover code says a person making an offer must show he has enough funds to buy 100 per cent of the firm.

The fiasco raised questions about whether Dr Soh had made the offer in good faith, knowing that he had already pledged the shares to Opes.

The SIC ruled that he had breached various takeover code rules, including not taking enough care to make sure he had enough financial resources to make the offer. He had not received a formal letter of offer from OCBC Bank to finance him, for example.

It also censured him for not disclosing that he had lost control of part of his 46.54 per cent stake. Dr Soh believes he continues to own those shares.

Merrill Lynch, which seized the shares as collateral, was late in disclosing the stake and had in fact crossed the 30 per cent threshold. This is the level that triggers a takeover offer, but the SIC said the breach was not ‘opportunistic’.

While investors may have been burnt, the SIC did not find it appropriate to order compensation to be made.

The SIC’s findings close only one chapter on this case. OCBC said it is considering legal action against Dr Soh. In an announcement yesterday evening, it alleged that a document confirming that Dr Soh had enough funds for the takeover was forged. The SIC, in its grounds of decision, said it was unable to express a view on this matter.

OCBC had earlier referred the matter to the Commercial Affairs Department, which has not given any update on the matter.

On his part, Dr Soh has taken out a lawsuit in Australia against Opes and Merrill Lynch for the return of his shares.