SEMBCORP Industries has received notice of a lawsuit by New York-listed water company Cascal seeking to prevent its hostile takeover of the firm, and has hired lawyers in the United States to defend itself.
On Friday, Cascal filed a suit against Sembcorp and its wholly owned unit, Sembcorp Utilities, in New York, claiming violations of US securities laws and breach of confidentiality agreements.
The lawsuit seeks a court order to stop Sembcorp's hostile takeover of Cascal and claims unspecified damages.
Sembcorp denies Cascal's claims, and yesterday repeated its position that it is 'not in breach of any laws, regulations or contractual obligations' in relation to its offer to buy out Cascal's shareholders. It will make further announcements when appropriate, Sembcorp added.
On April 26, Sembcorp said that it had struck a deal with Cascal's biggest shareholder, Biwater Group, to acquire its 58.4 per cent stake in Cascal, and would make an offer to buy out all Cascal shareholders at US$6.75 a share - an 11.3 per cent discount to the last-traded price of US$7.61 for Cascal shares before the announcement.
But if Sembcorp secured less than 80 per cent of Cascal's shares, Sembcorp would cut its offer price for all Cascal shareholders, including Biwater, to US$6.40 per share. Biwater had agreed to sell its Cascal shares even at the lower price, Sembcorp said.
Hours after Sembcorp announced its intentions, Cascal's board publicly rejected the offer, calling it 'inadequate and coercive', and advised shareholders to take no action.
Since Sembcorp announced its takeover bid, Cascal's share price has plunged. Cascal shares changed hands at US$6.73 each at the end of trading on Monday, compared to US$7.61 before the announcement.
'The structure of the proposed Sembcorp tender is coercive and seeks to diminish the rights of shareholders to participate in Cascal's growth and share va-lue appreciation,' said Cascal spokesman Michael Wager in a statement last Friday.
'The offering price is inadequate and under the proposed terms would result in an illiquid market for our publicly traded common shares. Accordingly, the Sembcorp bid is unacceptable.
'Cascal's continued independence is in the best interest of shareholders and Cascal intends to vigorously defend this position.'
The escalating battle for control of Cascal is complicated by the fact that its chairman, Adrian White, is an interested party in the transaction. Mr White is also Biwater's founder and executive chairman, with ultimate control of Biwater, which appears eager to sell its stake in Cascal - even if it receives less than the market price for Cascal shares.
Before its latest takeover bid, Sembcorp had approached Cascal's board directly with a similar offer, which was rejected by an independent committee of directors. Biwater then struck a deal directly with Sembcorp to sell its stake in Cascal.
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