Yesterday, shareholders had rejected an offer by the Youcan Foods International’s chief executive officer to vend the new factory’s development rights and land use, which he held a substantial share to the subsidiary of the ice cream maker.
Youcan, a Chinese company included in Singapore’s list, manufactures and deals out frozen foods and ice cream products under its private brand.
Last January, Youcan stated that Youcan Foods Hangzhou, its completely owned subsidiary, had signed a contract to purchase the development rights and land use of a new factory located in Hangzhou city in the province of Zhejiang.
Mister Dai Tianrong, Youcan’s chief executive and executive chairman, is the involved person in the deal as he owns 51 percent of You Kang Foods Holdings, the transacting company for the factory site.
If the deal had went through, it would have perceived Mr. Dai accepting shares of Youcan reciprocally rather than hard cash.
Mister Dai holds about around 44 percent of Youcan, but yesterday it was not possible for him to make a vote on the resolution because this was a concerned party transaction.
For several shareholders who disapproved of the transaction at the company’s over-the-top general assembly, the proposed deal had lifted a critical question: “Is it in their interests to acquire the land and property from Mr Dai, who has a significant interest in them, in the first place?”
”For a CEO buying his own piece of land to put into his own company in exchange for shares at a depressed price is questionable”, said an anonymous shareholder.
“It’s not in the interest of shareholders. Their stake gets diluted and the CEO sells the land possibly at a high price to the company,” he added.
Jong Voon Hoo, Youcan’s company secretary and chief financial officer said that the land is worth about 51 million yuan or S$11.2 million, while the factory after completion will be worth 200 million yuan.
These costs were not pulled out from nowhere, but originated from an independent estate valuer, he added.
In addition, the company had joined one independent financial consultant who gave advice to its independent directors on the transaction. Afterwards, the information was transmitted to the shareholders through an authorised circular, he stated.
“We’re finding alternatives to move this forward and we regret that shareholders are not for the resolution”, Mr. Jong noted The Straits Times. However, he refused to give any comment regarding the possible conflict of interest.
Indeed, Youcan shareholders are allowed to be watchful, especially when Chinese listings or S-chips here have made their reputation poorly damaged and influenced by information of account irregularities and loan covenant breaches.
Several tensed investors have stayed away from the sector since last year. In reality, some S-chips had not succeeded in catching the market rally coat-tails in March.
A few of Youcan’s biggest shareholders are well-known individuals in Singapore, which include Sam Goi or ‘Popiah King,’ Tee Yih Jia Food Manufacturing’s executive chairman; Ng Ser Miang, the chairman of FairPrice; and ex-MP Chandra Das.