|It's been 12 long months since KLSE-listed Serba Dinamik bought a 24.84% stake in Singapore-listed CSE Global for S$57.67 million. Details here.
(The stake has inched up to 25.23% currently owing to a reduction in the issued capital of CSE Global after CSE made a series of share buybacks).
Since the April 2018 transaction by Serba Dinamik, investors have been wondering what synergy or deals that CSE would derive from Serba Dinamik being its controlling shareholder.
There has been none so far.
The reason became apparent with the issue of a circular dated 2 April 2019 by CSE to shareholders.
The circular relates to a proposed adoption of a shareholders’ mandate for interested person transactions -- specifically transactions with Serba Dinamik. Shareholders will vote on the matter at an EGM on 18 April 2019.
The circular pointed out that the transactions will potentially be positive for CSE: "Such transactions with the Interested Persons as customers of the Group will provide additional revenue to the Group and enhance its profitability."
The Proposed IPT Mandate will not apply to transactions with Dr. Ir. Mohd Abdul Karim Bin Abdullah and/or Syed Nazim Bin Syed Faisal. They are, respectively, CEO and CFO of Serba Dinamik. They have been appointed non-executive directors of CSE Global.
Under Chapter 9 of the Listing Manual, a listed company may seek a general mandate from shareholders for recurrent transactions of a revenue or trading nature or those necessary for its day-to-day operations, which may be carried out with the listed company’s interested persons.
The Proposed IPT Mandate applies to the Mandated Transactions that may be carried out with Serba Dinamik and its subsidiaries and associated companies (collectively, the “Interested Persons”).
The categories of Interested Person Transactions which will be covered by the Proposed IPT Mandate are:
|(a) the supply and provision of automation, communication and security equipment and solutions and services by the Group to the Interested Persons;
(b) the purchase of third party automation, communication and security equipment by the Group from the Interested Persons;
(c) commission payments by the Group to the Interested Persons for project orders referred to the Group by an Interested Person which add to the business volume of the Group and benefit the Group commercially; and
(d) provision and/or obtaining of such other products and/or services which are incidental to or in connection with the provision and/or obtaining of products and/or services in sub-paragraphs (a) and (b) above.
The Serba Dinamik Group provides its engineering services and solutions for oil and gas production platforms, crude oil and gas refineries, petrochemical manufacturing plants, liquefied natural gas plants, power production plants, and water and utilities plants.
• Rationale and Benefit of Proposed IPT Mandate
“While the Group has not entered into any transactions with the Interested Persons previously, the Group expects that the transactions with the Interested Persons set out in Section 2.5 of this Circular are to be entered into by the Group in the ordinary course of business.
The circular said "the Independent Financial Adviser is of the opinion that the methods and procedures under the Proposed IPT Mandate, if adhered to, are sufficient to ensure that the Mandated Transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders."