Studi Kasus C K Tang Singapore - Corporate Governance

C.K.
Tang: The Fight

towards Privatisation
Surestya Arina
Desinta Putri
Rizki Fatakhi
About C.K. Tang
• C.K. Tang Limited is a Singapore-based company founded by Tang Choon
Keng in 1932.
• Business of departmental store retailing and general merchandising.
• Since 1958, has been operating at its flagship building, Tangs Plaza,
• C.K. Tang is a company characterised by the presence of a major controlling

shareholder.
• In 1975, C.K. Tang was listed on the then Singapore Stock Exchange, which
later became the Singapore Exchange
Board of Directors
• During the company’s history, there was at least one Tang family member
on the board.
• However, in 2008, Tang Wee Sung, CEO and the majority shareholder of the
company since 19878, stepped down from the board, after he was alleged to
be involved in an illegal organ trading scandal.
• During the third and successful privatisation attempt, the board of C.K.
Tang was chaired by Ernest Seow, a former PricewaterhouseCoopers (PwC)
partner.
• According to C.K. Tang’s Corporate Governance Report in 2009, the board

would be responsible for enhancing long-term shareholder value and the
overall management of the Group.
First Privatisation Attempt:
Scheme of Arrangement
• On 29 October 2003, Tang Wee Sung offered minority shareholders S$0.42
per share via a scheme of arrangement.
• This represented a premium of about 35% above the average closing price
over the last five trading days.
• This price also meant a 19.2% discount against the company’s net tangible
assets as at 30 September 2002.
• However, the resolution failed to pass, as the shareholders felt the offer
price was too low and wanted more information on the company’s prospects.
Second Privatisation Attempt:
Unconditional Cash Offer (1)
• In December 2006, Tang Wee Sung and his brother Tang Wee Kit, offered
shareholders S$0.65 per share through Kerith Holdings, a company equally
controlled by the brothers.
• This second attempt was in the form of a voluntary unconditional cash offer.
The S$0.65 per share offer reflected a 16.1% premium to C.K. Tang’s latest
closing price at that time.
• It also represented a 9.4% premium to the company’s net asset value, based
on its annual report for the financial year ending 31 March 2006.
• When the offer deadline expired, insufficient acceptances had been received.
• The reason was widely believed to be the undervaluation of the commercial

property Tangs Plaza.
• As a result, the company continued its listing on SGX.

Second Privatisation Attempt:
Unconditional Cash Offer (2)
• On 15 July 2008, at an Annual General Meeting (AGM), minority
shareholders questioned the board about the company’s financial losses, as
well as its plans to delist the company from SGX.
• The board declared that a privatisation exercise is solely the decision of the
majority shareholder.
• The board said it owed a fiduciary duty to shareholders, which is to look

after the business of the company.
• Attempts to vote against standard resolutions such as advance payment of

directors’ fees were defeated, because of the Tang family’s majority holdings
Third Privatisation Attempt:
Voluntary Delisting (1)
• On 8 May 2009, the Tang brothers made their third privatisation attempt
through an investment holding company
• The remaining shareholders were offered S$0.83 per share, which

represented a 22% premium over the company’s last traded share price of
S$0.68 prior to the offer, and a 21% discount to the firm’s net asset per share
price of S$1.05 as of 31 December 2008.
• The board recommended that the minority shareholders accept the offer,
based on an evaluation of the offer provided by the independent financial
adviser PwC.
• At an Extraordinary General Meeting (EGM) held on 31 July 2009, minority
shareholders questioned if the offer was reasonable, given that the shares
had closed at a price above the offer at that point in time.
• Nonetheless, the board retained its recommendation, saying that market

prices typically varied.
• This was despite earlier statements by the Tangs saying that the
privatisation offer was to allow shareholders to monetize the value of their
investments at a premium over its historical trading prices.
• Doubts were raised about the independence and neutrality of the CEO of the
company at the time, Foo Tiang Sooi, because he was personally related to
Tang Wee Sung.
• Foo had worked under Tang from 1999 to 2006. He and Tang were also
former schoolmates.
• However, he dismissed these facts as irrelevant.
• Foo also added that he was related to the shareholder who posed the
question, but this fact was irrelevant as well.
• Another shareholder called for a vote of no-confidence against the board
chairman.
• After consulting with legal advisors, the board rejected the motion, with the
chairman saying that the action was an attempt to frustrate the meeting.
• Even as shareholders tried to probe further, the chairman called for the vote
to be taken.
• The resolution to privatize the company was passed with 96.25% of votes in
favour of the proposal.
Key Area of Controversy: Tangs
Plaza
• Under Rule 26.2(a) of The Singapore Code on Takeovers and Mergers, “a
property which is occupied for purposes of the business must be valued at
the open market value for its existing use”.
• During all three privatisation attempts by the Tang brothers, the offer price
reflected an undervaluation of Tangs Plaza.
• PwC stated that the property was valued at S$340 million on 25 May 2009.
• In contrast, minority shareholders contested that the site was easily worth
at least S$400 million, according to an independent valuer.
Discussion Questions (1)
In cases of companies where there are controlling shareholders, explain why
the interest of controlling and minority shareholders may diverge, using the
CK Tang case as an example.
Agency cost issue:
Controlling interest = management interest -> maximize private wealth

(control right)
Non controlling = maximize share value

• Dalam kasus C.K.Tang, pemegang saham mayoritas memutuskan untuk
melakukan privatisasi perusahaan dengan cara membeli semua saham yang
ada (buyout) dengan tujuan menguasai sepenuhnya perusahaan.
• Kontroversi muncul karena satu aset perusahaan, yakni Tangs Plaza,
nilainya dianggap terlalu rendah oleh sebagian pemegang saham minoritas.
Menurut pemegang saham minoritas, harga bangunan Tangs Plaza adalah
sebesar $400 juta dengan menggunakan penilai independen. Namun, hasil
analisa PwC, Tangs Plaza bernilai $340 juta. Harga ini jauh dibawah harga
bangunan lain di sekitarnya.
• Pemegang saham minoritas menilai bahwa adanya pembangunan kembali
(redevelopment) Tangs Plaza dapat mempengaruhi harga buyback saham
yang seharusnya bisa lebih tinggi. Namun, pihak direksi C.K.Tang
menyatakan bahwa tidak dibutuhkan penilaian terhadap pembangunan
kembali aset di masa depan. Terlebih lagi harga yang ditawarkan jauh
dibawah nilai net aset yang dimiliki perusahaan
Should independent directors be primarily concerned with the interests of the
minority shareholders?
Ya, agency cost issue. Harus melindungi hak minority in pursue of

maximizing share value
Evaluate the independence of C.K. Tang’s board during the third privatisation
attempt. Do you think this affected the actions of the board during the
privatisation process?
Syarat independent directore Code of CG Singapore di tahun 2005 (terakhir

sudah direvisi di tahun 2012):
“…independent notwithstanding the existence of relationships or

circumstances which may appear relevant to its determination, including the
following:
a.) a director being employed by the company or any of its related corporations
for the current or any of the past three financial years;…..”
Di tahun 2009 Dewan memenuhi persyaratan independen (terakhir bekerja

tahun 2006). Menurut kami, board sudah independen.
Do you believe that the basis of valuation was fair? Explain.
Tidak, valuasi property dalam tahap “redevelopment” tidak diperhitungkan

hanya dengan dalih “tidak ada rencana untuk melanjutkan”.
With regards to the privatisation episode, suggest improvements that would
help protect minority shareholders in the future.
• Pemerintah Singapura harus membuat kebijakan yang dapat melindungi

pemegang saham minoritas lebih jauh lagi. Pemerintah Singapura
sebaiknya membuat aturan tambahan mengenai sanksi yang akan
dikenakan kepada director of boards apabila terbukti tidak memberikan
atau tidak memperhitungan nilai dalam delisting secara lengkap. Begitu
juga dengan badan audit apabila terbukti membuat kesalahan.
• Perusahaan segera membuat hak-hak pemegang saham (termasuk saham

minoritas) di dalam Anggaran Dasar a.k.a Article of Association, serta
langkah yang dapat ditempuh atau kompensasi yang dapat diberikan
apabila adanya pelanggaran hak
C.K. Tang used three different privatisation methods. Explain how these
different methods work and the pros and cons of these different methods from
the viewpoints of the shareholder(s) wanting to take a company private versus
minority shareholders who may prefer thatthe company remain listed.
• Metode pertama yaitu “scheme of arrangement” bekerja dengan cara
memberikan perjanjian share premium di atas harga rata-rata terhadap
pemegang saham minoritas. (S$0.42, 35% above share value, 19.2% below
net asset value)
• Metode kedua adalah menawarkan pembayaran kas langsung ditambah
dengan penawaran harga yang lebih tinggi. (S$0.65, 16.1% above share
value, 9.4% above net asset value)
• Metode ketiga adalah penambahan kas lagi, dan ketika masih ada
keraguan, melakukan voting akan privatisasi yang akhirnya disetujui oleh
sebagian besar pemegang saham. (S$0.83, 22% above share value, 21%
below net asset value)
• Pihak pro privatisasi.
 Pro: metode pertama lebih murah, sedangkan metode kedua mungkin lebih cepat
disetujui, dan metode ketiga melakukan pemaksaan tidak langsung dengan cara
voting.
 Kontra: semakin lama semakin mahal biaya untuk privatisasinya.
• Pihak kontra privatisasi.

 Pro: semakin lama premi sahamnya semakin meningkat.
 Kontra: Metode pertama masih lebih murah dan tidak mendapatkan kas secara
langsung. Metode kedua masih lebih murah daripada metode ketiga.

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C.K.

Tang: The Fight

• Business of departmental store retailing and general merchandising.

• C.K. Tang is a company characterised by the presence of a major controlling

• According to C.K. Tang’s Corporate Governance Report in 2009, the board

• The reason was widely believed to be the undervaluation of the commercial

• As a result, the company continued its listing on SGX.

• The board said it owed a fiduciary duty to shareholders, which is to look

• Attempts to vote against standard resolutions such as advance payment of

• The remaining shareholders were offered S$0.83 per share, which

• Nonetheless, the board retained its recommendation, saying that market

• However, he dismissed these facts as irrelevant.

Agency cost issue:

Controlling interest = management interest -> maximize private wealth

Non controlling = maximize share value

Ya, agency cost issue. Harus melindungi hak minority in pursue of

Syarat independent directore Code of CG Singapore di tahun 2005 (terakhir

“…independent notwithstanding the existence of relationships or

Di tahun 2009 Dewan memenuhi persyaratan independen (terakhir bekerja

Tidak, valuasi property dalam tahap “redevelopment” tidak diperhitungkan

• Pemerintah Singapura harus membuat kebijakan yang dapat melindungi

• Perusahaan segera membuat hak-hak pemegang saham (termasuk saham

• Pihak kontra privatisasi.

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