CosmoSteel CEO questions potential takeover of the firm, says offer is undervalued

Straits Times

18-06-2025

The opposition from CosmoSteel CEO Ong Tong Hai comes amid more active shareholder efforts to secure better deals in such situations. ST PHOTO: KUA CHEE SIONG
SINGAPORE – The chief executive of CosmoSteel Holdings has spoken out against an offer to acquire all the shares of the company, amid more active efforts by shareholders to ensure they secure a fair deal in such situations.
Mr Ong Tong Hai, together with his brother Ong Tong Yang and their father Ong Chin Sum, told The Straits Times on May 30 that they are 'deeply concerned' over the 20 cents per share voluntary conditional cash offer by 3HA Capital on May 15.
The three are long-term shareholders of CosmoSteel Holdings with a combined 26 per cent stake.
The offer is conditional on 3HA Capital holding over 50 per cent of CosmoSteel's issued shares by the closing date of the offer, which will be announced in an offer document to be dispatched no later than June 5. An independent financial adviser (IFA) will be appointed in due course.
'We believe the offer does not represent fair value for shareholders and is made under potentially misleading premises,' the Ongs said in a statement to ST.
'We urge shareholders to carefully consider and evaluate the offer and stand with us in protecting the long-term interests of all shareholders.'
The Ongs noted that 3HA Capital had highlighted the risk of CosmoSteel being suspended from trading or delisted for being on the SGX watch list since June 2018 as one of the reasons shareholders may prefer a cash exit.
However, the offer price does not account for the proposed abolishing of the watch list by Singapore Exchange Regulation and its confirmation that no listed company would be forced to delist or suspend trading pending the review, they said.
The bourse regulator on May 15 said it is consulting the public on scrapping the watch list for loss-making mainboard companies as part of efforts to reduce regulatory friction and encourage price discovery.
The Ongs added that 'the offer price grossly undervalues CosmoSteel's recovery trajectory, assets, and growth potential'.
While 3HA Capital's offer price of 20 cents is 48.1 per cent higher than CosmoSteel's share price of 13.5 cents on May 14 before the offer was announced, it is still a discount to the company's net asset value per share of 29.3 cents as at March 31.
It also does not account for the company turning a profit for the first half of the 2025 financial year, compared with losses in the previous year, the Ongs said.
In fact, Mr Ong Tong Hai has been purchasing shares of the steel company in the open market since May 23 at between 21 cents and 22 cents per share, which is higher than 3HA Capital's offer price.
The Ongs also noted that the four-party consortium behind 3HA Capital are direct competitors of CosmoSteel. They include Hanwa Singapore, which is a subsidiary of Hanwa Co, a Japan global steel trader which currently holds a 31.6 per cent stake in CosmoSteel.
'Their acquisition of a controlling stake raises serious questions about future strategic direction, potential conflicts of interest, and the independence of the company's operations,' the Ongs said.
They warned that accepting 3HA Capital's offer could mean giving up long-term value for short-term liquidity, in a deal structured under incomplete disclosures and involving parties who may not prioritise the interests of minority shareholders.
They said in their statement: 'We call upon the board of CosmoSteel to fully evaluate and address these concerns in their formal response to the offer, and to act in the best interests of all shareholders.
'It is important that we do not let short-term fear or misleading representations deny us of long-term value.'
The family is speaking out amid a rise in low-priced offers for SGX-listed firms in recent years, some of which cite low liquidity as a justification and put pressure on minority shareholders to accept early under the threat of trading suspension.
One example is Boustead Singapore's offer for its subsidiary, Boustead Projects, for 90 cents per share in 2023. After the Securities Investors Association (Singapore), or Sias, called the offer a 'low-ball' one that undervalued the company, it was raised to 95 cents.
An IFA nevertheless deemed the offer unfair but reasonable, as the price was below its $1.17 to $1.38 valuation range, but reflected the stock's illiquidity.
When Boustead Projects' public float subsequently fell to just 4.5 per cent, which is below the 10 per cent requirement, trading in its shares was suspended. The SGX then directed Boustead Singapore to make a fair and reasonable exit offer for Boustead Projects. A final offer of $1.18 was accepted by over 90 per cent of independent shareholders, and the company was delisted in February 2024.
In a November 2023 commentary, Sias president David Gerald had urged minority shareholders not to feel pressured into accepting unfair offers for shares they have likely held for years, adding that the risk of indefinite trading suspension should not be used to justify accepting unreasonable prices.
'The 4.5 per cent who held out have shown that individually they may not be able to make much of a difference, but collectively they can exercise considerable clout,' he said then.
Meanwhile, some minority shareholders of Great Eastern (GE) have urged the Securities Industry Council (SIC) to consider amendments to Singapore's takeover and mergers code to promote fair treatment of all shareholders involved in privatisation offers.
They include addressing the prolonged suspension of trading in the shares of target companies in a privatisation deal, and imposing stronger obligations on the company's directors to seek better alternatives for minority shareholders when offers are unattractive.
GE is expected to announce a final proposal to meet SGX's free float requirements no later than June 8. The company's shares have been suspended from trading since July 2024, after falling below the 10 per cent threshold following a takeover bid by OCBC Bank, its majority shareholder.
OCBC has managed to secure 93.52 per cent of GE's shares, short of the 95 per cent needed for a compulsory acquisition and delisting, after some minority shareholders resisted the offer, arguing that OCBC's bid of $25.60 per share undervalues the insurer.
Said Mr Ong Chin Woo, who is among those who have resisted: 'Investors, especially retail investors, lack the resources and means to fight for their interests. Hence, they are particularly dependent on the protection of the code to get a fair and reasonable outcome from their investment.'
Amid an ongoing consultation by the SIC to amend and strengthen the code, Ms Stefanie Yuen Thio, joint managing partner at TSMP Law, noted that it would be useful to have more avenues for minority shareholders to band together to discuss any offer and, if they think fit, to reject the offer.
'Right now, it's almost impossible for shareholders to do that – they have no means to contact other shareholders and it's for bodies like Sias to convene a meeting,' she said, adding that she has been calling for the law to be changed to facilitate shareholder activism and self-help.
Join ST's Telegram channel and get the latest breaking news delivered to you.