Shareholders cry foul over Nestle delisting procedure
Nestle Lanka PLC shareholders are calling for a fresh vote and an investigation by the Securities and Exchange Commission (SEC) into ‘certain irregularities’ at the Extraordinary General Meeting (EGM) for its delisting resolution on June 30.
The meeting started at 3 pm and when the result of the ballot was announced, it was 8.45 pm.
Touted as the longest EGM in the history of Sri Lanka’s capital market, the 6-hour meeting was getting uglier by the minute, with a heated discussion during which tempers often got frayed amidst a confrontation between a lawyer and a shareholder.
Many shareholders were on edge alleging foul play by Nestle and Capital Alliance PLC (CAL), hired by Nestle to manage the delisting.
They alleged that CAL over the past month had telephoned, trying to convince them to vote in favour of the delisting. A shareholder told the Business Times that company employees had called them asking to vote in favour of the delisting resolution without justifying it. “They called selected shareholders – for example, my wife did not get a call, but I got one,” one said.
A top CAL official had called someone who had a substantial number of shares. “They called me thrice and the first time told me it is not necessary to come in person to the EGM but to send the proxy,” another said.
He said that 48 hours before the cutoff date for submitting proxies, someone from CAL called him and said that he can come to the office and hand it over or volunteered to send someone over to collect his proxy. “Failing this, he suggested that I vote online. When I inquired about the signature, he said that they will do the signature. When I pointed out that they do not know my signature, he asked me to put my name down and that they will consider it as the signature.” A second shareholder, who was critical of the allegedly unethical way of collecting proxies by the company through an online portal, said three shareholders were trying to dissuade other shareholders from voting against the delisting.
He said that one of them had told as many as 40 people that this resolution will go through and there is no point in opposing it. “He had also promised to work out a deal for them if they vote against, saying one such deal is a factory tour of Nestle in an air-conditioned bus and a Rs.5000 worth of Nestle products hamper.”
He told some at the EGM that they are better off going to the Central Finance AGM lunch happening on the same day in Kandy. “He also said that the Agalawatte Plantation AGM happening in Nittambuwa will give them two kilograms of tea.” He had said that he can accommodate only 60 people according to the seats available on the bus.
The delisting resolution was passed by a narrow margin, with 76.2 per cent of those present in person or proxy voting in favour – just ahead of the 75 per cent threshold required to pass.
Nestlé was ultimately allowed to delist itself at 6.5x trailing twelve-month (TTM) earnings – well below other listed Nestle group peers well below listed peers in the Colombo Stock Exchange, and well below its own historical trading averages.
Some analysts alleged that Nestle took advantage of a low price in the market to delist at a bargain. “It was a steal,” an analyst said.
CAL and Nestle officials were unavailable for comment. A Securities and Exchange Commission (SEC) source said the SEC is looking into the matter.
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