From The Business Times, Singapore
24th December 1999
Effective Capital sweetens its Clob proposal yet again Staggered release of shares over 18 months; fees 2%
By Conrad Raj
Malaysian businessman Akbar Khan's Effective Capital has come up with
an improved proposal that calls for the transfer of frozen Malaysian
Clob shares to their owners over 18 months on payment of a 2 per cent
fee.
The offer announced yesterday follows a proposal by the Securities
Investors Association of Singapore (SIAS), which is seeking the
staggered release of the shares over 12 months.
Effective Capital's proposal, called the Irrevocable Request and
Authority plan, or IRA, was forwarded to the Central Depository of the
Singapore Exchange yesterday. Under the plan, Clob shareholders are to
have their shares transferred to them at weekly intervals over an
18-month period.
Both shares and non-share securities like warrants and convertible
loan stocks will be migrated concurrently within four months, unlike
Effective's earlier proposal under which the non-share securities were
to have been transferred over five months first.
The migration will start once all the administrative issues involving
the setting up of individual accounts with the Malaysian Central
Depository have been resolved. Effective Capital expects this to be
done within four months.
This means that Clob investors who agree to its proposal will have all
their shares within 22 months of their acceptance of the offer, which
will close on Jan 31 next year.
This compares with the five-year migration period of the original
Effective Capital proposal and the 27 months of its more recent plan.
The migration of the shares of each of the about 130 securities
involved will be done in batches of 50 units a week.
An owner of 1,000 shares of a Clob counter can thus have his full
amount of shares credited in five months, instead of having to wait
for 18 months.
For this service Clob investors will have to pay a fee of 2 per cent
of the value of the Clob securities as at Dec 22 this year --
estimated to be more than 15 billion Malaysian ringgit (S$6.6
billion).
Effective Capital will therefore stand to collect over M$300 million
in fees if it succeeds with its latest proposal to migrate the Clob
shares and other securities to the Kuala Lumpur Stock Exchange. The
fee is in line with the 1 to 2 per cent fee that SIAS, an association
that represents about 30 per cent of the some 172,000 Clob account
holders, is proposing to pay to the KLSE for the migration.
SIAS president David Gerald said earlier this week that if Bintang
Melewar -- one of the Malaysian parties working to help resolve the
impasse over the frozen shares -- is roped in to help administer the
transfer, then it would get a cut of the fee.
In a statement last evening, SIAS said it had not seen Effective
Capital's latest offer document yet and will not be involved in
Effective's staggered release proposal.
From what it has heard, it noted that Effective's offer is an
improvement but SIAS said the revised release period of 18 months can
be reduced further.
SIAS also expressed its concern that while Effective Capital claimed
that its offer had received all the necessary Malaysian approvals, it
had provided no evidence of such official sanction.
SIAS said its proposal to the KLSE earlier this month offers a faster,
cheaper, simpler and safer solution to the problem. In particular,
SIAS said it was preferable to have the KLSE control the release of
shares, rather than a private company owned by three individuals. The
shares, previous traded on Singapore's over-the-counter market Clob
International, have been frozen since September last year when
Malaysia imposed capital controls to stem speculative attacks on its
currency.
Mohamed Moiz, Effective Capital's chief executive officer and nephew
of Mr Khan, said those who accept the IRA offer are, however,
subsequently free to accept any other offers, including general
offers, approved by the Malaysian authorities.
He also drew a comparison between Effective's offer and those proposed
by Negri Sembilan prince Tunku Abdullah's Bintang Melewar, United
Engineers Malaysia and Malaysian lawyer Tai Sim Yew.
"Ours is the only one with all the necessary approvals from the
Malaysian authorities in place and the only one to have been formally
transmitted to Singapore's Central Depository.
"With this proposal, accepting Clob securities owners can have their
entire portfolio released for trading on the KLSE in as short a period
as five months but not longer than 18 months, depending on the number
of securities they own."
Mr Mohamed added that with the cooperation of the Singapore Exchange
and SIAS, the stockbroking community and the relevant authorities in
Singapore and Malaysia, the administrative part of the exercise could
take less than the anticipated four months.
Mr Mohamed also disclosed that he was scheduled to meet with SIAS
yesterday. He said that in coming up with the IRA proposal, Effective
Capital had taken into account the following:
The interest of Clob securities owners and their desire for a
practical, workable and final solution.
The interest of the general investing public in Malaysia.
Minimise any possible negative impact on the KLSE.
Minimise the need for any changes in the workings, mechanisms or
systems of the Malaysian Central Depositary or related parties.
Minimise any adverse effects on any of the counters involved. Ensure
fairness to all Clob investors and counters.