Calata Corp. has rejected the proposal of the Philippine Stock Exchange to conduct a tender offer to small shareholders, saying the move will “kill the company.”
Calata said in an open letter to shareholders the company was not capable of conducting a tender offer to small shareholders because of insufficient retained earnings to cover the buyback of shares.
Calata as of end 2016 has only has around P400 million in retained earnings, or below the P1 billion it will need in order to conduct a tender offer to all small shareholders.
“Given the current legal limitation and financial limitation on the retained earnings of the company, it was repeatedly relayed that a tender offer will not only kill the company, but also, it will not ensure that shareholders will be properly and sufficiently compensated as its creditor banks will surely exhaust the company’s cash as preferred creditors before allowing the company to use its money for the tender offer,” Calata said.
The PSE on Monday rejected the proposal of Calata to sell out to Millennium Global Holdings Inc. and spin off its assets to privately-held Agriphil Corp. in a bid to save the agriculture firm from being delisted from the stock exchange and protect minority shareholders.
Instead of a selling out to Millennium Global, the PSE wants to give Calata
an opportunity to conduct voluntary delisting on the condition that Calata will conduct a tender offer to small shareholders.
Calata noted that a tender offer could have an effect of liquidating the whole company given the large public float currently at 73.15 percent.
“To liquidate the company just because the Philippine Stock Exchange wants a tender offer is not only impractical but grossly unfair. It is unfair simply because a regulatory violation by a single shareholder should not be a justification to kill a legitimate business which has been profitably operating for the past decades,” Calata said.
“Thousands of families are depending on the business which include not only its employees but hundreds of thousands of farmers and dealers who very much depend their livelihood on the business. This does not mean however, that the person responsible should go unpunished. It is simply stated that the tender offer being forced upon the company is not a win-win solution after all,” the company added.
Calata said the sellout to Millennium Global remained the best solution for the small shareholders of the company.
“With the acquisition, the public shareholders in the “new” Calata Corporation will have new management, a new and promising business and a new hope that their investment will be recovered. Instead of meeting a dead end, the investment made from hard earned money is given a fighting chance to grow and yield profit,” Calata said.