Chip Eng Seng rights issue meets thin demand

Bricks at a construction site in Ho Chi Minh City, VietnamBricks at a construction site in Ho Chi Minh City, Vietnam

Chip Eng Seng’s renounceable rights issue of 156.50 million shares met with weak demand, with the company saying Monday it received valid acceptances for 51.04 percent of the shares available, with another 2.11 percent were taken up in excess applications.

The rights issue had been priced at S$0.63 each, a slim discount compared with the closing price of S$0.65 on the day the offering was announced. On Monday, the shares closed at S$0.63.

The balance of 73.32 million rights shares, or around 46.85 percent of the total available under the offering, will be taken up by the controlling shareholders, who entered a sub-underwriting agreement.

The underwriter for the offering, UOB, had entered a deal to allow controlling shareholders Celine Tang @ Chen Huaidan and Gordon Tan @ Tang Yigang to earn a sub-underwriting fee to take up rights shares which were not accepted by existing shareholders.

The sub-underwriting deal had proved controversial as it allowed the Tangs to raise their stake in Chip Eng Seng above 30 percent without making a general offer for all of the company’s shares.

After the rights issue’s completion, Celine Tang and her husband, Gordon, will see their Chip Eng Seng stake rise to 36.35 percent, the filing said.

Celine Tang is also deemed interested in the 2.75 percent stake held by Senz Holdings, in which she is a director, boosting her total interest in Chip Eng Seng to around 39.10 percent, the filing said.

Chip Eng Seng said it raised net proceeds of around S$96.3 million

Around S$50 million of the net proceeds are earmarked to finance the possible expansion of the property development segment in Singapore and overseas, while around S$20 million is expected to finance possible strategic investments and/or acquisitions in the education segment, Chip Eng Seng said.

Around S$10 million will be used to finance the growth of the hospitality segment and another S$16.3 million will be used for general corporate purposes, Chip Eng Seng said.

The new shares are expected to be begin trading on SGX around 18 October, the filing said.

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