MAINBOARD-LISTED Best World International is looking to delist from the Singapore Exchange (SGX) by way of a selective capital reduction, citing the poor consumer sentiment and growth headwinds in its China market.
A selective capital reduction refers to the cancellation of all issued ordinary shares in the company, except those held by non-participating shareholders. In return for their cancelled shares, shareholders will receive cash.
In a bourse filing on Friday night (Mar 22), Best World said it intends to obtain approval for the selective capital reduction at an extraordinary general meeting (EGM), where a special resolution must be passed by eligible shareholders.
Eligible shareholders who can vote for the selective capital reduction do not include the company’s major shareholders who are involved with the business, said the beauty products distributor.
Best World is majority owned by holding company D2 Investment, with about 44.8 per cent of the issued and paid-up share capital. D2 is owned by Best World founders Dora Hoan and Doreen Tan, with each holding a 50 per cent stake.
Best World co-chair and group chief executive Hoan also owns an additional 7.5 per cent of the company, while co-chair and president Tan holds another 7.3 per cent. Chief operating officer Huang Ban Chin owns a 5.4 per cent stake.
Hoan’s daughter Li Lihui has less than 0.1 per cent in Best World and is assumed to be acting in concert with Hoan, who is also Best World’s managing director. Tan’s daughter Pek Jia Rong also owns less than 0.1 per cent and is assumed to be acting with Tan.
In this vein, Hoan, Tan, Huang, Li and Pek will abstain from voting on the selective capital reduction or from making a recommendation on the exercise.
Best World also noted that the selective capital reduction also requires the approval and confirmation of the High Court.
Under its rationale for the bourse exit, Best World noted that it continues to expect growth headwinds for its China market, due to uncertainties such as stock market volatility and the challenging property sector weighing on consumer sentiment.
It added that going private could also enable it to dispense with the compliance costs needed to stay listed, as well as costs of other regulatory requirements.
“The company believes a privatisation… will provide the necessary flexibility to optimise its resources to focus on the longer-term strategies of the business,” said the group.
The selective capital reduction would therefore enable eligible shareholders to exit their investment at a “fair market price” despite Best World’s low trading liquidity. It has appointed Evolve Capital Advisory to be its independent financial adviser, which will provide an opinion on the exit offer.
In its results for the year ended Dec 31, 2023, Best World posted a net profit of S$120.4 million, down 11.7 per cent from S$136.3 million from FY2022, on weak consumer sentiment in China. Its revenue also declined, falling 7.7 per cent to S$514.5 million year on year, from S$557.3 million.
This is not the first time the company has considered a delisting. Amid a trading suspension due to regulatory concerns about its business model in China, the company in November 2021 had said a delisting might be appropriate due to market conditions and the circumstances of its China operations.
It conducted two off-market offers to buy back shares for S$1.36 apiece, which were both oversubscribed.
Best World shares eventually resumed trading on Nov 14, 2022, on the back of an improved audit opinion for FY2021 and legal opinions noting the non-compliance risk of its business model in China were remote.
Shareholders requisition EGM to vote on dividend policy and directors’ pay
In a separate bourse filing on Friday, Best World said it had received a letter dated Mar 21 from shareholders seeking to pass six resolutions at the next general meeting.
The letter was sent by shareholders who hold at least 10 per cent of shares in Best World, and serves as a notice requisitioning an EGM, or as a notice for the resolutions to considered at the next annual general meeting.
In the first resolution, the requisitioning shareholders seek to have the company engage an independent financial adviser to advise the board on the appropriate cash reserves and dividend policy of the group, and for the group to post the recommendation and the report on SGX.
In its latest financial results, Best World’s cash and cash equivalents stood at S$574 million, as at Dec 31, 2023. The company did not declare a dividend for FY2023, citing working capital requirements and an uncertain business climate.
The second resolution requests the board disclose the recommendation of the group’s remuneration committee on the pay of its executive directors, as well as to attach a copy of the report prepared by advisory consultacy HRGuru for a benchmarking exercise that was completed in August 2023.
The benchmarking exercise was in relation to the pay of the company’s executive directors comparable to the benchmarks.
Alternatively, if the HRGuru report is unavailable, the requisitioning shareholders ask the company to engage a compensation consultant to review its executive directors’ compensation and publish the subsequent report on SGX.
Another resolution involves the company disclosing any transactions, as defined by Chapter 10 of the Listing Manual of the Singapore Exchange Securities Trading, upon approval by shareholders in the EGM.
The final three resolutions call for the removal of independent directors Lee Sen Choon, Adrian Chan and Chester Fong.
Best World’s board is considering the letter’s contents and seeking legal advice.
The requisitioning shareholders also indicated they are open to meeting with the board to discuss the concerns of the requisition letter and to “find common ground” with the board, said Best World.
Best World called for a trading halt on Friday. As at 12.16 pm that day, its shares were trading up 1.1 per cent or S$0.02 at S$1.77. Shares of Best World will resume trading on Monday.
