GGRAsia – Adviser warns shareholders against Sinogreen takeover

Adviser warns shareholders against Sinogreen takeover

Sep 26, 2014 Newsdesk Latest News, Macau, Top of the deck

Macau junket veteran Jack Lam Yin Lok has completed the subscription of 325 million new shares in Sinogreen Energy International Group Ltd for a total amount of HKD164.4 million (US$21.2 million). But now the firm appointed to advise the independent shareholders is warning against a follow-up offer.

Mr Lam now controls 65.85 percent of the entire issued share capital of Sinogreen, a firm trading in silicon rubber keypads. Pursuant to Hong Kong’s Takeovers Code, Mr Lam is now required to make an unconditional mandatory cash offer for all the offer shares.

Mega Start Ltd and Fount Holdings Ltd have 10.07 percent and 3.69 percent of Sinogreen’s issued share capital, respectively. Other unidentified shareholders control 20.39 percent of the shares.

According to a filing on Friday, Fortune (HK) Securities Ltd, on behalf of Mr Lam, is offering HKD0.35 in cash for each share. The offer price is similar to the subscription price paid previously.

The terms of the deal however have raised concerns. Sinogreen’s independent board committee has advised the company’s independent shareholders “not to accept the share offer”. The recommendation is based on a report from Veda Capital Ltd, a financial adviser.

In its report, Veda said the terms of the share offer “are not fair and reasonable”.

“The offer price is at a deep discount i.e. 97.20 percent to the closing price of the share as at the latest practicable date,” the financial adviser stated. Veda said its assessment took into consideration the “positive outlook” of the Macau gaming industry and the “solid background” of Mr Lam.

Mr Lam’s Jimei Group Ltd is regarded as one of the largest junket operators in Macau. Currently Jimei runs Jimei Casino next door to the Grand Lapa hotel on Macau peninsula, as well as junket rooms in seven other Macau properties, according to its website. Jimei also operates Fontana Leisure Parks and Casino at Clark Special Economic Zone in the Philippines.

According to previous filings, HKD96.90 million of the proceeds of the Sinogreen subscription exercise will be used to start a gambling junket business in Macau.

In Friday’s filing, Sinogreen confirmed the intention to explore the opportunity of entering the gaming promotion business in Macau.

“…The offeror [Mr Lam’s company] may consider establishing the gaming promotion business by indirectly participating in the gaming promotion business in Macau through contractual (or variable interest entity) arrangements subject to relevant necessary regulatory approvals,” it said.

The Sinogreen deal follows a string of similar announcements this year, through which Macau VIP gaming promoters seeked access to the Hong Kong equities market via an already listed firm with no previous recorded involvement in the casino industry.