Saturday April 27, 2013

Silence no longer an option

Optimistically Cautious by ERROL OH

THIS is about a tussle for control, accusations of wrongdoing, an apparent attempt to gain support with an eye-popping pledge, and a policy U-turn. And no, this has nothing to do with Malaysia's 13th general election.

Bright Packaging Industry Bhd's announcement on Thursday that it was scrapping a plan to pay generous dividends, shows that there are lingering effects from a boardroom battle that began last December with a requisition for an EGM to remove some directors and to appoint replacements.

That showdown ended with the conclusion of the EGM in February, when the resolutions for the proposed board changes were carried. However, that doesn't necessarily mean it's smooth sailing all the way from then on.

The new people at the helm of Bright Packaging have been in charge for two months now. The cancellation of the dividend policy is not all that surprising a promise to pay out all distributable profits as dividends for the next five financial years sounds too good to be true anyway but what else is in store for the manufacturer of aluminium foil packaging materials?

The problem is the current management team isn't saying much, which is similar to the reticence of the four shareholders who had demanded that the EGM be held.

The four were Datuk Wira Syed Ali Abbas Alhabshee, Ang Lay Chieng, Tee Wee Keat and Lye Jun Fei. They proposed that they be appointed to the Bright Packaging board and that then managing director Wong See Yaw and executive director Yap Kok Eng be removed along with non-independent non-executive directors Wong Siew Yoong (who's See Yaw's sister) and Yeap Cheng Chuan.

Yap and Siew Yoong retired and were not re-elected at the AGM preceding the EGM, while See Yaw and Yeap were ousted at the EGM. Syed Ali, Ang, Tee and Lye secured board seats. Ang was the only person among the quarter who was appointed as an executive director. Voting on the resolutions were by poll, which indicated that right until the end, there was resistance to the changes.

(Two other board members at the time, executive chairman Nik Mustapha Muhamad and independent director Low Wan Choon, have been retained.)

What was said and done between December and the EGM on Feb 21 added to the drama leading up to the shareholder meeting. But the traffic flowed one way only.

Between Jan 14 and Feb 4, the Bright Packaging board issued three press releases. The first one touted the experience and abilities of the four directors who faced being booted out. It also pointed out that based on the profiles provided, Syed Ali, Ang, Tee and Lye seem to have “very limited or no knowledge” of Bright Packaging's business, and may require time to build industry knowledge.

On Jan 18, the company announced that the directors had resolved to pay out 100% of all distributable profits as dividends over the next five financial years “to reward shareholders”.

When interviewed by a daily, the then MD, See Yaw, was asked if the dividend policy was a sweetener for the minority shareholders ahead of the EGM. “Of course we need to please the shareholders. It's my job (to do so). At any point that I don't do that, I do deserve to be removed from the board,” he said.

The announcement of the dividend policy was accompanied by a second press release from the Bright Packaging directors. In it, the board noted that it had not received any comments from the requisitionists, and raised several questions about their motives and plans. Still, the requisitionists said nothing publicly.

The third press release was issued to address allegations made in a letter from a group of minority shareholders to the Minority Shareholder Watchdog Group (MSWG). The Bright Packaging board said the allegations were “frivolous and baseless” and were made to discredit the board, especially those directors whose removal has been proposed.

The board then went on to give its side of the story in respect of four areas that the MSWG had brought up.

In the end, these efforts to explain themselves didn't help the four directors who were dropped. Demi Maju Sdn Bhd, a Wong family vehicle, has sold Bright Packaging shares a number of times last month, easing its shareholding from 30.6% to 28%.

The reconstituted board has been busy this month. On April 19, the directors said there would be another EGM to seek shareholder approval for proposed share buy-backs.

On the same day, the company announced that it wanted to halve the par value of its shares to 50 sen and to reduce its share premium account by up to RM2.16mil. This is so that it can slash part of its audited accumulated losses, which stood at more than RM24mil as at Jan 31.

According to Bright Packaging, the aim is “to rationalise the statement of financial position of the company and to facilitate the company's objective to obtain a better financial position moving forward”.

These proposals are essentially accounting manoeuvres and don't involve cash. But dividend payments do require cash outflows. As such, it's reasonable for the board to do away with the dividend policy when the declared focus is on the growth of the company.

“Based on the current assessment of cash needs of our business, the company requires the earnings to be re-invested into the company to build its capacity and that excessive funds are required for the reinvestment for business expansion,” it says.

The announcement on Thursday made it clear that Bright Packaging has undergone a board revamp and that the new board wants to broaden the business. However, the directors have yet to share details with the shareholders. Perhaps they're not ready to do so, but they shouldn't keep others waiting for too long either.

Keeping mum may be a strategic advantage when you're plotting to wrest control of a listed company, but once you're in the driver's seat, reluctance to engage with shareholders and the rest of the investing public, is a sure way to breed apathy or worse, suspicion.

Executive editor Errol Oh is mystified by cases of listed companies being subjects of noisy tugs of war and then fading into anonymity later. What about the huge potential that sparked the intense contests in the first place?

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