A lawsuit to stop EON Capital Bhd (EONCap) (5266) from being taken over by Hong Leong Bank Bhd in a RM5.06 billion deal looks set to drag on and become more complicated than expected.
EONCap, in a stock exchange filing late yesterday, said the Kuala Lumpur High Court, which opened the case yesterday, had fixed the matter for trial beginning September 20 this year.
This raises the question as to whether Hong Leong will walk away from the deal as it has said it may do so if all approvals are not secured by August 15.
Hong Leong, when contacted yesterday, declined to comment on the matter.
Analysts, however, said they would not be surprised if Hong Leong extended the deadline as it had already done so once before.
EONCap's biggest shareholder, Primus Pacific Partners, had launched the suit against the bank's directors on June 21, claiming that the Hong Leong bid was unlawful in structure and oppressive to small shareholders.
All eyes are now on EONCap to see if it will press ahead with an extraordinary general meeting (EGM) to let shareholders decide on the deal, ahead of a court settlement.
"The problem is, if they wait for the court case, this issue could drag on for a long time," said an analyst from a local bank-backed brokerage.
Complicating matters is the fact that Primus has threatened to initiate contempt proceedings against the directors if they decide to press on with the EGM.
"What I told the judge (at court yesterday) is that they (the directors) are forcing us to (do so) if they issue the circular for the EGM," Primus' lead counsel from law firm Cheang & Ariff told Business Times.
At this point, with this hanging over their heads, it is difficult to say what EONCap's directors will choose to do, the analyst said.
"There has been no precedent for a case like this, so this is unchartered waters. We're not sure what to expect," he remarked.
Lawyers for EONCap and its directors are to file their affidavits by July 28, after which Primus will do the same by August 6.
S. Suhendran, one of the lawyers from Kadir Andri & Partners which is representing Rin Kei Mei, one of the directors, said that nothing controversial took place at court yesterday. None of the directors were present.
"All the preliminary stuff was done in chambers. I will file the affidavit in the next few weeks," he told reporters outside the courtroom.
The court fixed August 17 for case management.
Hong Leong is doing a takeover of EONCap's assets and liabilities, not its shares, and as such, it needs only 50 per cent plus one vote for the deal to be successful at an EGM.
The three biggest shareholders which have indicated they want to sell - Rin, Tan Sri Tiong Hiew Kheng and Khazanah Nasional Bhd - already hold a combined 41.7 per cent stake.
Primus is resisting the Hong Leong offer of RM7.30 a share as its entry cost in the bank in 2007 was much higher at RM9.55 a share. It believes that a fair takeover price would be at least RM6.18 billion, or RM8.91 a share.
By Adeline Paul Raj
The Edge Malaysia
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