Donaco International Limited co-founder Joey Lim has succeeded in preventing the sale of a 9.71% stake in the company to Asian investment firm Orchard Capital Partners (OCP) after Australia’s Takeovers Panel made a declaration of unacceptable circumstances on Tuesday.
The declaration related to OCP’s on-market acquisition of the 9.71% interest between 7 and 31 December 2018 at the same time as it was locked in negotiations with Total Alpha Investments Limited (Alpha), a company controlled by Lim, over a defaulted loan repayment.
OCP, having been issued senior secured bonds in an aggregate principal amount of US$34.3 million by Alpha in May 2017 and also granted share options over Donaco shares, ultimately enforced its security interest over a 27.25% stake in the company in February 2019 – lifting its total holding in Donaco to almost 37% and prompting Lim to file an objection claiming breaches to Australian takeover laws.
Agreeing with Lim’s assessment, the Takeovers Panel ruled this week that the circumstances of the on-market acquisition were unacceptable because the market was not aware OCP had a security interest in 27.25% of Donaco shares, was not aware Alpha was in default and that OCP’s actions before it acquired a substantial interest in Donaco had the effect of avoiding disclosure of the situation.
The Panel has now made orders vesting the 9.71% shares in Donaco acquired by OCP between 7 and 31 December 2018.
Lim, who established Donaco with his grandfather and Genting Group founder Lim Goh Tong in 2002, was terminated from his role as Managing Director and CEO in March following a lengthy leave of absence but remains on the Donaco board.