Hong Leong Asia to launch mandatory offer for Thakral

Aug 16, 2006
The Business Times

Hong Leong Asia has raised its stake in Thakral Corp to 36.7 per cent, triggering a mandatory offer for the mainboard-listed company that was founded by the Thakrals, one of the most prominent Singaporean Indian families on the corporate scene.

For Hong Leong Asia, the takeover will give it Thakral's China's distribution network of 4,200 retailers to sell consumer electronics to the country's burgeoning middle class.

The conditional offer, at eight cents a share, will be made through Venture Delta, an indirect wholly owned unit of New York-listed China Yuchai International which, in turn, is a subsidiary of Hong Leong Asia.

Based on the 1.92 billion shares in issue, Hong Leong Asia's offer for the remaining 63.3 per cent stake it does not own is valued at about $97 million.

Trading of shares in Thakral was suspended yesterday at 2 pm pending the announcement. The stock last traded at 8.5 cents. The company, which generates 85 per cent of its business in China distributing consumer electronics, listed on the mainboard in 1995.

Venture Delta first acquired a near 15 per cent stake in troubled Thakral at 11.7 cents a share in February last year when Thakral did a private placement to raise money. The stake was later raised to 19.25 per cent.

Yesterday's raising of the holding to 36.7 per cent came from Venture Delta exercising its right to convert bonds held into 529.3 million new Thakral shares at eight cents each.

Contacted on his mobile phone, outgoing Thakral chief executive Inderbethal Singh Thakral told BT that the offer price was low and he did not think he would sell to Hong Leong Asia. 'The net asset value is 11 something cents,' he said.

Mr Singh, 46, steps down on Oct 7 after 22 years with the company. His father, Kartar Singh Thakral, 72, is founder and chairman of Thakral. Through Thakral Investments Ltd, the family owns 15.35 per cent of the company.

Thakral's net asset value is 11.25 cents as at end-June 2006.

Asked if it was an 'unfriendly' takeover, Mr Singh said: 'I wouldn't like to comment.' As to whether his father would remain as chairman, he said it would be up to the board. 'Let's see how things come out from here - as long as he can contribute, he would like to stay on,' said Mr Singh.

Sherman Kwek, 30, scion of Kwek Leng Beng, head of the Hong Leong Group, is now Thakral chief operating officer.

Asked if he was sad to exit the company, Mr Singh said: 'I'm quite okay with it; as long as there's a clear direction going forward.' He said he would work in the family's other businesses.

Hong Leong Asia's offer will be conditional upon it getting more than 50 per cent of the company.

While Thakral has won many accolades for its entrepreneurial endeavours over the years including being ranked among the 2006's top 10 companies in China and in the top 50 in the Singapore International 100 ranking organised by IE Singapore, it has found it hard to make money in China.

It reported a $1.10 million loss for the first quarter ended June 30 following a $32.6 million loss for financial year ended March.

Thakral almost imploded during the Asian crisis after suffering $600 million of foreign exchange losses.

The Thakral group had its beginnings in a small retail business since 1905, the Punjab Store in Bangkok, according to its website.

In 1936, the Thakrals' enterprising spirit led them to Japan, where they continued to focus on the family's core business - textiles. Later, the group ventured into several other countries, including Singapore and China in the 1950s and 1960s.

In 1973, Thakral Brothers started to support the group's diversification from the textile business into consumer electronics. The group's turning point came in 1974, when it ventured into consumer electronics in China, building on the network laid in the 1960s.

The Thakral family also controls Thakral Holdings Group, which invests in hotels and commercial properties in Australia.

Listed on the Australian Stock Exchange in 1994, Thakral Holdings Group has a market capitalisation of A$462.3 million (S$557.8 million).