Bangkok--27 Jun--SEC
The SEC urges shareholders of Demco Plc. (DEMCO) to carefully study DEMCO’s plan to acquire shares of a connected person - Aeolus Power Co., Ltd. (Aeolus) before exercising their voting rights. DEMCO will gradually increase its holding in Aeolus from 8 to 27 percent whereby 35,135,134 newly issued Aeolus shares with a par value of B10 each will be subscribed at B37 per share, totalling B1,300 million. For Aeolus, it invests in project of wind power plant through 60 percent of shareholdings in First Korat Wind Co., Ltd. (First) and K.R.2 Co., Ltd. (KR2), the operators of wind power projects in Huai Bong, Nakhon Ratchasima.
The aforesaid transaction is considered a significant asset acquisition with value over 50 percent of DEMCO’s total assets. It is also deemed a connected transaction due to the fact that DEMCO’s director also serves as a director of Aeolus’s major shareholder. DEMCO is accordingly subject to mandatory disclosure of the transaction to the Stock Exchange of Thailand and required to seek shareholders’approval with at least 3/4 of shareholders attending the meeting and eligible to exercise voting rights.
Independent Financial Advisor (IFA) describes in its report that DEMCO shareholders should not approve the transaction even though the economic feasibility study indicates potential of the project and it would benefit DEMCO’s core business as the project contractor. IFA is of opinion that:
1. While purchasing price of B37 per share is in line with fair value estimated by IFA at B37.70, IFA did not obtain information on other investors’ investment cost and was unable to make respective comparison. IFA, therefore, is unable to conclude that the said price is fair; and
2. DEMCO proposed investment structure as a minority shareholder pertains certain risks in that DEMCO will hold not more than 27 percent of total shares in Aeolus- the holding company invests in the project operators, First and KR2. Comparing to other shareholders that directly invest in such two operators, DEMCO will face limitation in term of minority protection.
IFA indicates that prior to making their decision, DEMCO shareholders should, with due care, take into account and compare benefit to and effect on the company in cases where it will or will not acquire Aelous shares. IFA also notes that its opinion has been expressed upon a draft contract and thus changes in proposals and conditions stipulated in the draft may materially affect decision as to whether or not the transaction should be approved. In this regard, IFA’s report also provide opinions and recommendations on certain amendment to contract.
The SEC urges DEMCO shareholders to carefully study information, attend extraordinay general shareholders’ meeting to be held on June 27, 2011 and seek clarification or explanation from the board of directors and executives. For those who cannot attend the meeting should give proxy to others and clearly state their own decision on each agenda item in the proxy form to protect their own’s interest.