Donaco International founder Joey Lim and his brother Ben found themselves fighting against the wishes of key company executives long before a recent move by shareholders to remove the brothers from the board.
A divide between the Lim family and Donaco International executives while Joey was fighting to maintain control of the company came to light on Friday following publication of a decision by Australia’s Takeovers Panel against the acquisition of shares in December by Asian investment firm Orchard Capital Partners (OCP).
The Takeover Panel ruled that OCP was not entitled to the on-market acquisition of a 9.71% stake in Donaco because the market was unaware it was in the process of enforcing its security interest over the 27.25% stake held at the time by Joey Lim. OCP had loaned Lim more than US$34 million under a secured lending agreement in 2017, roughly 18 months before he defaulted on an interest payment on 5 November 2018.
According to details of the decision published on Friday, OCP introduced an unnamed gaming industry firm to Donaco Chairman Stuart McGregor, Executive Director Ben Reichel and Joey Lim in January of this year with the firm keen to invest in Donaco via the purchase of new shares equal to 15% of issued share capital and at a significant premium to market price.
The strategic relationship would also have seen the firm assume management rights for one of Donaco’s properties – either Star Vegas in Cambodia or Aristo International in Vietnam. However, while McGregor and Reichel voted in favor of the transaction taking place, the Lim brothers voted against it. The transaction ultimately never eventuated.
Notably, the Takeovers Panel’s decision revealed that while Donaco was considering the investment proposal, the Lim brothers had introduced an alternate proposal from a consortium in which they held a material personal interest. According to the Panel, Donaco submitted its concern that introduction of the alternate proposal by the Lims was “opportunistic, vexatious and frivolous, and had been made for a collateral purpose, namely, to delay or frustrate a potential transaction between Donaco and the Potential Placee in order to pave the way for the alternate proposal.”
It was also revealed that OCP had recommended Matthew Hunter – a director of fellow Australian-listed gaming firm Silver Heritage Group – to sit on the Donaco board. In an email dated 18 December, an OCP representative wrote, “I have copied Mathew Hunter. Mathew sits on the board of a number of companies we have invested in. We think he would be suitable as a board member of Donaco.”
Another email to McGregor dated 9 January stated, “We would very much appreciate if you could arrange to meet Matthew as soon as is convenient as we are confident he would be a very positive addition to the DNA board.”
Donaco instead announced former Silver Heritage Chairman David Green as a new addition to the board in April after hiring a recruitment consultant.
In another twist, Silver Heritage Chairman James Spenceley recently acquired a 5% stake in Donaco on-market and quickly launched an action to remove the Lim brothers from the board.
Joey Lim had his employment with Donaco terminated in March, but remains a non-executive director of the company, as does Ben Lim whose tenure as interim Managing Director and CEO came to an end last week following the appointment of Paul Arbuckle as new CEO.