Unlocking higher offers: How company funds can boost prices for delisting

Over the past few years, companies that wished to privatize and delist have adopted one of three possible routes: a voluntary delisting, a scheme of arrangement, or a voluntary offer coupled with compulsory acquisition.

- David Gerald

All three have their advantages and disadvantages, and the rules have been tweaked to try and preserve minority rights as far as possible.

Yet in most cases, there is the problem of "low-ball" offers that are typically pitched to buy out minority shareholders—at prices that are seen to be exploitative and unfair.

It stands to reason that offerors, who are usually major shareholders, would table low prices, since as buyers, they would quite naturally want to pay as little as possible to achieve their goals.

But what if the funds to take the company private come from the company itself and not the offeror? Would this make a difference?

SELECTIVE CAPITAL REDUCTION AS DELISTING METHOD

Enter a fourth delisting route, known as a selective capital reduction (SCR), which has begun to make an appearance in the local market, and deserves scrutiny. It was employed by beauty products maker Best World, which delisted in 2024 via an SCR.

An SCR in a delisting involves cancelling a portion of a company's share capital, specifically targeting shares held by minority shareholders, while the shares of the majority shareholders remain unaffected.

This mechanism allows the company to return capital to minority shareholders in exchange for their cancelled shares, effectively facilitating a delisting and privatization.