The planned merger of two publicly listed companies seemed a fait accompli until it was opposed by a minority shareholder. The shareholder engaged Weber Shandwick Worldwide and through an intensive, focused campaign on a modest budget the merger was thwarted - in what has been seen as a key victory for minority shareholders rights in Asia.
In December 1999, two stockbroking firms, Vickers Ballas Holdings Ltd and G K Goh Holdings Ltd, announced a plan to merge into Singapore’s largest stockbroking group. With both companies publicly listed, the merger proposal required 75% shareholder approval. Shareholder meetings were planned for mid 2000, once the formal merger documents were prepared.
Reef Holdings and Y S Fu Holdings, private companies representing the family interests of businessman Mr Ong Beng Seng, collectively own almost 15% of the shares in Vickers Ballas. Mr Ong is one of Asia’s more prominent business tycoons whose interests include Four Seasons Hotels, and franchises for the Hard Rock Café and Planet Hollywood restaurants.
After months of private deliberation, Mr Ong resolved to vote against the merger at a shareholder meeting scheduled for June 19, 2000. In late May, he decided to voice his opposition publicly and Weber Shandwick Worldwide was engaged to provide counsel and media relations support. Weber Shandwick had not previously worked with any of Mr Ong’s companies. We were engaged on a Friday afternoon and requested to develop a communications strategy by the Sunday evening.
The brief for Weber Shandwick was clear: Motivate sufficient shareholders to join with Reef/YS Fu in voting against the merger. And in doing so, ensure that Mr Ong’s reputation as one of Asia’s leading business tycoons was maintained.
Intended Audience: The key audience was Vickers Ballas shareholders: there were more than 11,000 mostly small investors and their votes would most likely be crucial in determining the outcome of the merger. At the same time, we needed to communicate to members of the investment community (stockbrokers, institutional fund managers, financial advisors) who would influence shareholders’ voting decisions. The financial media would be an important channel to reach the shareholders.
Weber Shandwick quickly identified a number of communications challenges. Firstly, the respective boards and management positioned the merger as friendly and in the best interests of both companies. It also had the support of 40% shareholder Singapore Technologies (ST). As ST is a large industrial group owned by the Singapore government, this was interpreted by many as indicating the merger had tacit official endorsement, a potentially significant factor given the dynamics of business in Singapore.
Secondly, in most such mergers in Singapore, small investors usually take a passive role – they are used to “going with the flow” and having little say in the outcome. Additionally, the formal merger documents were 190 pages long and very complex; they would probably be very confusing to many small shareholders.
Thirdly, the merger terms were based on a compromise between differing methods of share valuation (market capitalisation, earnings per share and net tangible assets). Thus, the question of whether the merger terms were fair “depends on how you look at it”. It was likely, therefore, that many journalists would not wish to take sides in such a somewhat arcane debate over valuation methodologies.
Fourthly, it was inevitable that the media would focus on the personality of Mr Ong. Although described frequently as “flamboyant”, Mr Ong maintains a very low media profile and invariably refuses to give interviews. This would deny us a high-profile spokesperson to counter an expected strong media blitz by the pro-merger parties.
Finally, it was highly unusual in the Singapore business environment for shareholder dissent to be voiced in such a public manner. This would lead to all sorts of speculation and “conspiracy theories” about why Mr Ong was opposing the merger. Such speculation might heighten the merger controversy but it risked clouding the arguments being put forward by our client.
To get a clear message across to small shareholders, it was vital that the arguments were kept straightforward. We needed to crystallise why the merger was not in their financial interests as well as Mr Ong’s. All communications were deliberately kept short and to the point, with one core message:
“We do not believe the merger terms fully recognise the underlying value of Vickers Ballas”.
By doing so, this avoided entering an argument about the merits of the merger in principle – it was the merger terms that were under dispute. At the same time, it was important to reassure shareholders that if the proposed merger failed, Vickers Ballas still had a strong, viable future on its own (or with other partners).
Additionally, our client decided that for legal reasons the PR activity should not go as far as overtly canvassing shareholders to vote against the merger, or soliciting proxy votes from the public. The public stance taken was that our client was communicating to other shareholders about why they would vote against the merger – and simply urging others to consider these reasons when making their own decisions on the matter.
Shandwick recommended a short, sharp PR campaign involving media releases, newspaper advertisements (written as ‘open letters to shareholders’ and published in both English and Chinese) and intensive media relations. Activities were concentrated during the week starting Monday May 29, but continued until the shareholder meeting on June 19.
The “first wave” of PR activity from Monday May 29 provoked tremendous media and market interest. On that Monday, Vickers Ballas management held a three-hour press conference – while our client issued a two-page press release. Yet by focusing the message on a clear core message that journalists could easily digest and report, resultant media coverage the following day was heavily weighted in favour of our client.
It was apparent that in this first week, our client gained the initiative in the minds of the media and the investment community. Although Vickers Ballas management belatedly ran an extremely vigorous campaign to win over shareholder support – including full-page advertisements almost every day in the final week before the vote - it turned out to be too late.
At the Vickers Ballas shareholder meeting on June 19, the merger gained 69.9% support – short of the 75% level required. Thus, the merger proposal lapsed.
The failed Vickers/Goh merger is now regarded within the investment community in Singapore and across Asia as an example of the growing importance of minority shareholder rights – long an issue in western markets but generally ignored in Asia.