ILB’s minority shareholder files lawsuit over RM15.9m acquisition

by ANIS HAZIM / pic source: ilb.com.my

BT INVESTMENT Capital Ltd, a minority shareholder of Bursa Malaysia Bhd’s Main Market-listed ILB Group Bhd, has filed a lawsuit against ILB’s board members and Impian Nuri Sdn Bhd in an attempt to prevent them from conducting transactions that oppress the rights of the minority shareholders.

The lawsuit came following an announcement by ILB to fully fund a RM15.9 million proposed acquisition of nine parcels of commercial land with shop lots in Seksyen 19, Petaling Jaya, Selangor, via the issuance of 37.78 million new ordinary shares in ILB.

The defendants named in the suit are ILB’s board of directors comprising Tee Tuan Sem, Datuk Karownakaran @ Karunakaran Ramasamy, Makoto Takahashi, Wan Azfar Wan Annuar, Datuk Wan Hashim Wan Jusoh, Soh Eng Hooi and Jamilah Kamal, as well as the seller Impian Nuri and ILB.

BT Investment said the proposed issuance of the new shares will enlarge the number of issued shares to 232.81 million from the current 195.03 million.

“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,” it said in a statement today.

The dilution impact was announced by the board on July 15 on Bursa Malaysia.

“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, who will have a 16.67% stake in ILB,” it added.

According to BT Investment, the proposed 37.78 million 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 April 16, 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,” it said.

Notably, the interim measure was allowed until Dec 31, 2021, and extended to Dec 31, 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 financial year ended Dec 31, 2021, annual report which recorded a cash and bank balance of RM86.03 million,” it added.

BT Investment highlighted that ILB cited a strategic plan to generate sustainable earnings (rental income) 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% with yields of 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,” it noted.

Hence, 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.

“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,” it further said.

BT Investment 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.

BT Investment intends to requisition for an extraordinary general meeting for shareholders to query the board of their rationale and proposes to revoke the 20% general mandate.