Published June 12, 2009

Thakrals bulking up to fight on even footing?

By EMILYN YAP

	Email this article
	Print article
	Feedback

THE stalemate between two of Thakral Corporation's biggest shareholders - Hong Leong Asia (HLA) and the Thakral family - looks set to continue now that the latter has doubled its stake in the company it founded.

In fact, HLA may find it even harder to exercise influence over the consumer electronics distribution company's direction from here on. Its previous attempts to remove the group's chairman and founder, Kartar Singh Thakral, had fallen through even before the Thakrals raised their holdings.

Thakral Corp's announcements this week show that Prime Trade Enterprises bought a 12.77 per cent stake in the company from three parties - Babcock & Brown Securities Singapore, Top Notch Dragon and Queentex. The stake of 333.5 million shares at four cents each cost some $13.3 million.

Prime Trade Enterprises is owned by Bikramjit Singh Thakral, who is Mr Kartar's grandson. The share purchase raised Mr Kartar's deemed interest in Thakral Corp from 12.71 per cent to 25.48 per cent.

The Thakrals' stake is still smaller than HLA's, which stands at 34.42 per cent. Nevertheless, the family is now in a stronger position to defend against any future proposals that it considers threatening.

For minority shareholders, their hope is for the two biggest stakeholders to break their impasse and see eye to eye to take the company to a higher plain. Thakral Corp, which sits on a cash horde of some $122.9 million in cash and cash equivalents, going by its Q1 FY09 financials - has been having its ups and downs in terms of profitability.

HLA has not had much luck in changing Thakral Corp's leadership, getting another representative onto its board, or in maintaining its consumer electronics distribution focus. Unable to influence the company much, HLA has said that it is considering all options with regards to its stake.

With holdings of more than 25 per cent, however, the Thakrals will find it even easier now to block proposals that they object to.

Are the Thakrals also likely to go on the offensive and buy more shares for a takeover later? Some observers guess that the family may have raised its stake simply because they secured a good price. For the latest stake acquired, they are already sitting on a paper gain - Thakral Corp rose half a cent yesterday to close at 7.5 cents.

It would also be interesting to watch out for future developments since the Thakrals' stake is just 4.52 per cent shy of the 30 per cent takeover trigger point.

Another interesting issue is whether HLA too will raise its stake.

So far, HLA seems to be taking the Thakrals' actions in stride. 'We see the share purchase as a personal investment decision,' said a Hong Leong Group spokesman. 'The increase in shareholding does appear to reflect the shareholder's belief that the company is on the right track.' He also said that Hong Leong is still reviewing plans for the stake in Thakral Corp.

No matter what Hong Leong or the Thakrals have on their agenda, anything that ends the deadlock would please retail shareholders. They would also want to see the Thakral Corp counter break out of the low price trap it has been caught in for years.