Plato Capital unit may be obliged to make MGO for ECM Libra

Lim Kian Onn is the controlling shareholder of Plato Capital, whose shareholders also include his partners in the Tune group, Tan Sri Tony Fernandes and Datuk Kamarudin Meranun.

KUALA LUMPUR: Singapore-listed Plato Capital Ltd’s unit Truesource Sdn Bhd (TSSB), which has signed a conditional agreement to acquire 25.89% shareholding in ECM Libra Financial Group Bhd for RM27.45mil, may be obliged to undertake a mandatory general offer (MGO) for all the remaining shares in the financial services group.

In a notice to the Singapore stock exchange (SGX), Plato said this would be necessary if TSSB and Lim Kian Onn, ECM Libra's managing director and substantial shareholder, were deemed parties acting in concert.

Lim and his wife hold 24.37% of ECM Libra’s share capital. Lim is also a director and controlling shareholder of Plato, where he holds the post of chairman and deemed interest of 41.35%.

(Based on Plato’s latest annual report, other shareholders in Plato include Lim’s partners in the Tune group, Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, with deemed interest of 7.45% each. Plato has a joint-venture with Tune Hotels.com.)

Plato, an ICT solutions provider and hotel operator, said it currently had no intention to increase further its stake in ECM Libra.

It added that Lim had given a written undertaking to Plato to assume all of TSSB’s obligations under the ECM Libra MGO in the event that this arose and subject to regulatory approval.

Plato views the proposed share purchase as an opportunity to take a stake in a business with significant complementary investments in the education and precision engineering sectors.

It said ECM Libra’s fund management license offered synergies and strategic relevance relative to the future direction of the Plato group.

Furthermore, it found the price of 37 sen per ECM Libra share as attractive, representing a discount of 22.9% to ECM Libra’s announced consolidated net asset value as at Oct 31, 2015 of RM1.48 (adjusted for the completed distribution of cash and securities amounting to about RM1 per share to ECM Libra’s shareholders as announced on Nov 4, 2015).

To pay for the purchase, Plato proposed to issue redeemable convertible unsecured loan stocks (RCULS) to Lim, who has agreed to subscribe to S$10mil (RM30.1mil) aggregate principal amount of RCULS on satisfaction of the share sale agreement’s conditions precedent.

If Lim converts the RCULS into Plato shares, it may result in an obligation on Lim to make an MGO for Plato’s shares,

Loss-making Plato said the RCULS issue was the “most expeditious and cost efficient way” to raise the monies for the proposed purchase of ECM Libra shares.

Plato also noted that the group had negative working capital of S$1.499mil (RM4.51mil) as at Dec 31, 2015. The group reported on Wednesday an unaudited loss before tax of S$3.954mil (RM11.9mil) for the financial year ended Dec 31, 2015.

The conditions precedent set out in the share sale agreement are expected to be fulfilled by May 31, 2016.

Plato’s announcement to SGX was also posted on the Bursa Malaysia website.

ECM Libra shares added 2.5 sen to close at 35.5 sen on Thursday. (Trading of its shares resumed at 2:30pm after being suspended earlier.)