Thursday, August 18, 2011

Laxey Partners VS Wee Cho Yaw (UIS) - United international securities

If experience has it, perhaps more due diligence can be done before launching an activist approach, especially to an entity linked to one of the more well known businessman in the South East Asia.

Some points to note
  • Laxey only owns 10% vs Wee 49% (overwhelming difference)
  • Laxey was also quoted as impudent."Asia does not work this way!" Look at how TCI fund performed when it tried to do something with J Power Corp.
  • Wee did something meaningful to grow UIS, why would people vote for you especially with that sort of attitude. If you cannot relate to other minority shareholders, half the battle is lost.
  • Stating that UIS as a closed end fund is trading below NAV is a weak motivation to change the board since most closed end funds trade below NAV, even one of the best in the world, Berkshire Hathaway does not always escape this fact with a good reason. NAV is often not a good representation of earning power and firm value. 
  • Lastly, independence of the board is really a facade for Laxey to bring its own people up. How can the people be sure Laxey will not leave the shareholders high and dry?
Good Luck to Laxey and Mr. Andrew Pegge, it is interesting and helpful to see minority interests are still much alive. If you are reading and wish to get in touch, feel free to drop me a note.


Anonymous said...

The board of UIS is totally dominated by UOB, but the company is not totally owned by UOB. Is that fair? If Laxey has 10% of the ownership should it not have 10% of the "say" on the Board? In common with many companies, UIS is quite happy to take the minority shareholder's dollars but has no interest in listening to them - a dangerous tactic if they want to keep attracting outside investors, who will surely take their money elsewhere...

MTH Investments said...

Hi there Anon,

Sorry for the slow reply.

I do agree the board is a bit concentrated and most of the firm is owned by UOB group (under 50% owned by UOB). More importantly, I do wish well for minority investors and Laxey Partners to succeed.

However, with that level of ownership by UOB group, it will be an uphill battle. For one, UIS will not likely change to be an open end trust fund since that has the potential to change the share number (think UOB ownership) as well as drastically change the operating strategy and environment. Also, you are basically asking UOB to fork out money to pay off UIS shareholders at NAV prices, a substantial premium to market levels.

Investors will not likely abandon UIS since UIS has a pretty decent track record unless Laxey can prove they do better and convince the outstanding 50+% of minority investors out there that they have a plan and will trump UIS current plan. For one, having EUR Gilts in their portfolio is really silly. The key will then be to prove why the removal of the directors and of cos to also garner enough votes to disallow re-election and instead nominate new directors to the board.

MTH Investments said...

Best means is that Laxey has to prove that directors were not acting Bona Fide and not risk stepping too far into unrealistic altruism as in Mills v Mills (1938) 60 CLR 150.

It is hard to prove the directors are not of proper purpose or there is an conflict of duties and interests.


In depth post nice take on a fine company.

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