Apex gets green light


  • Business Premium
  • Saturday, 22 Jun 2019

THIS week’s outcome of APEX EQUITY HOLDINGS BHD’s EGM has put the stockbroking company one step closer to ending a tussle that began back in 2017.

That was soon after the late Chan Guan Seng and the current non-independent, non-executive director Datuk Azizan Abd Rahman sold their blocks of shares to ACE Investment Bank.

The entry of ACE, which bought a 25.01% block at around RM101.36mil (approximately RM2 per Apex share) had sparked a number of developments that has led to a series of legal cases as well as some sanctions by the Securities Commission (SC).

This week, 54.8% of Apex shareholders voted in favour of the merger with Mercury Securities Sdn Bhd. It shows that as many as 45.2% present and voting shareholders dissented.

This group is likely led by Lim Siew Kim - the daughter the late Genting Group tycoon Tan Sri Lim Goh Tong and the sister-in-law of the late Chan - and Lim Beng Guan and others associated with them.

Siew Kim is said to hold a significant stake in Apex, together with companies aligned to her.

She holds 2.79% personally. Pinerains Sdn Bhd and Cergas Megah (M) Sdn Bhd - said to be companies linked to Siew Kim - hold 4.39% and 3.73% respectively.

Beng Guan on the other hand, is linked to Concrete Parade Sdn Bhd, of which he has a 95% stake in, with 4.93% in Apex.

In court documents it has been revealed that this group of shareholders collectively control around 40% of Apex Equity currently.

The SC had initially given a conditional approval for Apex’s proposed merger with Mercury, that ACE had to exit Apex after the merger.

The regulator then decoupled this decision from the merger approval and said that it would pursue the conditions with ACE separately - where ACE needs to cease being on Apex’s board, sell down its shareholdings to below 15% a month after the merger and fully dispose its stake in Apex within six months from the completion of the merger.

However, the Apex and Mercury merger may solve the issue because ACE will be diluted post merger.

According to the circular to shareholders, post the merger, Mercury will end up being the largest shareholder with a 30.99% stake while ACE stake will come down to 15.71%.

The SC’s rules state any party taking more than 15% of a licensed stock broking firm will need to have the permission of the regulator, something that ACE does not have.

What ACE would need to do post merger would then be to trim its stake to below 15%.

However it is worth noting that Apex Equity has also proposed to a private placement of up to 20 million new shares, which is around 10% of its current share base.

This proposal also received shareholders approval at this week’s EGM and if it goes through will dilute ACE holdings to below 15%.

But here is what is interesting. Although ACE did not get the approval of the SC to be a controlling shareholder of Apex (by virtue of it holding more than 15%), there was nothing to stop it from voting in the EGM although there were last minute applications put in to disqualify ACE from voting, which was subsequently dismissed by the court.

So assuming if ACE voted in favour of the merger with Mercury, then it got to exercise its right to vote and determine the future of Apex, even though it was being asked by the SC earlier to sell down its shares because it was not fit and proper to control a licensed stock broker.

It is understood that only in very rare circumstances will the regulator prevent a shareholder who has paid full price for his shares to be prevented from voting, because that right to own shares and to vote is linked to the right to own property which in turn is enshrined in the Federal Constitution.

However, this had not stopped the opposing camp from seeking redress.

For example, Concrete Parade for example had filed a suit against ACE to stop it from voting but the court dismissed the application, Apex Bursa filings show.

Clearly such efforts did not result in any injunction preventing ACE from voting.

Legal scenario

So can anything hinder Apex merging with Mercury? Possibly through legal cases.

Apex is currently entangled in an intricate web of legal suits - their shareholders suing them and Apex suing their shareholders in return - but the board is optimistic that things will be in Apex’s favour.

On Wednesday’s EGM, Apex’ non-independent non-executive director Datuk Azizan Abdul Rahman said that he was optimistic that Apex had a good case (in relation to the suits it is facing) and added that the results from the EGM showed that shareholders were in favour of the proposed merger and private placement.

Concrete Parade sued Apex, its wholly-owned subsidiary JF Apex Securities Bhd, Mercury and several others on Feb 25 over the proposed merger, private placement and previous share buybacks.

Concrete Parade claims that the Apex Equity board had conducted the affairs of the company and exercised their powers oppressively and acted in a manner unfair and prejudicial to the interest of the plaintiff. It is also seeking a declaration that all share buy-backs done by the company are null and void.

On May 27, Apex and JF Apex sued 18 of its shareholders with Siew Kim and Beng Guan topping the list, on allegations that they are acting in concert for the purposes of obtaining control over the company and contravening the provisions under the Capital Markets and Services Act.

Among other defendants are Pinerains, Cergas Megah, Concrete Parade and ZJ Advisory - a company co-founded by Beng Guan.

Fun Sheung Development Ltd and Yenson Investments Ltd, who hold 15.78% and 5.18% stakes in Apex were also among those sued.

On June 17, Apex and JF Apex filed to be an intervener to a suit filed against ACE by Concrete Parade on June 12, which sought to prevent ACE from voting or exercising rights attached to its shares but this was dismissed by the Kuala Lumpur High Court.

Now that a simple majority of Apex’s shareholders had given their green light for the merger with Mercury, it is left to be seen if the legal cases can change the outcome of things in future.

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