Australian agency blocks sale of Donaco International
Joey Lim may be out as CEO of Donaco International Limited, but he is clearly still making his presence known. The former co-founder of the company has been successful in stopping the sale of 9.71% of the company stock to an Asian investment firm, it was announced on May 7.
Orchard Capital Partners (OCP) had been attempting to purchase nearly 10% stake, but efforts by Lim, working with Australia’s Takeovers Panel, blocked the move, as the agency declared this as an unacceptable circumstance.
OCP had declared their intention to purchase the shares in December of last year. At the same time, they were in negotiations with Total Alpha Investments, a company that is controlled by Lim. In December, Lim had defaulted on a loan his company had received from OCP, something that was not known by the Australian agency at the time.
The official announcement by the regulatory body was issued on May 7. Just hours later, Donaco announced that a hold had been placed on the transaction. The Takeovers Panel explained in their ruling that OCP was already a senior secured creditor to another company owned by Joey Lim.
This credit relationship between Total Alpha and OCP began when senior secured bonds were issued to Lim’s company in May 2017. The total amount loaned was $34.3 million and gave OCP the ability to exercise its voting powers on over 27.25% of the stocks in Donaco.
Just months later, Lim and his brother would be out at Donaco as part of a shakeup in the company that was partly due to the health of Lim. The Lim brothers owned 41.13% of the stock in Donaco, but the two announced in March that they had sold 27% of their stake in the company.
The company was already embroiled in a dispute with a group of former partners that had led to a lawsuit being filed in court. Plus, the company reported an $88.4 million loss in its most recent fiscal year.
While Lim was out at Donaco, he still had the power to stop the company from making the sale of the stock. According to the filing, the Takeovers Panel agreed with the assessment of the former CEO, ruling that the on market acquisition was unacceptable because of the nearly 28% shares that OCP could exercise in voting with Alpha. This gave them a substantial interest in both companies, which was a violation of agency rules.
Lim filed the objection in the early part of April. It is not known at this time whether Donaco or OCP will try to appeal or find some alternative to complete the deal.
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