A legal suit, lodged against ILB Group Berhad attempts to prevent its Board of Directors from conducting transactions that is deemed to oppress the rights of the minority shareholders.
BT Investment Capital Limited — a minority shareholder of Main Market-listed ILB Group Bhd – (formerly known as Integrated Logistics Bhd), has filed a lawsuit against the logistics services company and the company’s board members in an attempt to block an acquisition that could dilute shares owned.
The suit came about following an announcement by ILB to fully fund a RM15.9 million proposed acquisition of nine (9) parcels of commercial land with shoplots in Seksyen 19, Petaling Jaya, Selangor via the issuance of 37,780,000 new ordinary shares in ILB.
The proposed issuance of the new shares will enlarge the number of issued shares to232,805,503 from the current 195,025,503. This move will dilute existing shareholding and does not create value for shareholders as ILB’s earnings per share and any dividends, rights, allotments or other distributions that ILB may declare will be negatively impacted.
This dilution impact was announced by the Board on 15 July 2022 on Bursa Securities.
At the same time, the proposed transaction will create a new single largest shareholder in the form of the seller of the commercial parcel, Impian Nuri Sdn Bhd (“Impian Nuri”), who will have a 16.67% stake in ILB.
The proposed 37,780,000 new shares are equivalent to 19.37% of the current share base of ILB, just under the 20% General Mandate. ILB’s Board cited the 20% General Mandate for the proposed transaction, which was announced by Bursa Securities on 16 April 2020 as a way to provide a relief measure to public listed companies that need to raise capital in a timely and cost-effective manner to be injected as working capital or for operational expenditure to sustain the business during the pandemic.
This interim measure was allowed until 31 December 2021 and further extended to 31 December 2022.
Contrary to the intention of this 20% General Mandate, the proposed transaction does not result in funds being injected into the company, nor does ILB appear to need to raise cash as shown by its FYE 31 December 2021 annual report which recorded a cash and bank balance of RM86.03 million.
ILB positions itself as active in the solar renewable energy business following the divestment of most of the Group’s warehousing and logistic operations over the past few years. ILB cited a strategic plan to generate sustainable earnings as the reason to acquire the commercial land – a move inconsistent with its core business focus.
Moreover, the commercial parcel only has an occupancy of 45% as announced by ILB. It yields RM324,600 return per annum for properties valued at RM16.2 million. This translates to a 2.2% gross revenue for ILB and does not make sound or sensible commercial reasoning for a proposed acquisition meant to provide substantive recurring income.
The proposed transaction to give up a 16.67% stake and dilute existing shareholders for low yielding assets does not benefit or create value for shareholders.
Defendants named in the suit are ILB’s Board of Directors comprising Tee Tuan Sem, Datuk Karownakaran @ Karunakaran Ramasamy, Makoto Takahashi, Wan Azfar bin Dato’ Wan Annuar,
Dato’ Wan Hashim bin Wan Jusoh, Soh Eng Hooi and Jamilah binti Kamal as well as the sellerImpian Nuri Sdn Bhd, and ILB Group Berhad.
“Directors have a duty to act in the best interest of shareholders. Regretfully, a minority shareholder such as us, has to seek recourse in court to protect ours and the rights and interest of existing minority shareholders by seeking an injunction to restrain the proposed transaction from being executed,” said BT Investment Capital Limited.
BT Investment Capital Limited currently holds a 11.2% stake which will be diluted to 9.33% not through any action of its own but purely through the proposed transaction.
At the same time, BT Investment Capital Limited intends to requisition for an Extraordinary General Meeting (“EGM”) for shareholders to query the Board of their rationale and proposes to revoke the 20% General Mandate.
