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SET questions handling of proposed Noble share issue

Behind the scene to issuing 200 million new common shares of Noble Development Plc in last week till the company's shareholder complained to the Stock Exchange of Thailand not only to need the new capital to drive business. But its shareholders who also management team of the company needs to dilute the share of existing shareholders who now hold major stake in the company, a source who investigated the deal said.

A PROPOSAL for a new share issue by Noble Development has raised the eyebrows of the Stock Exchange of Thailand, as it was a major agenda item of which most shareholders were not notified in advance of their annual meeting.

"The management team led by CEO Kitti Thanakitamnuay holds only 14.2 per cent of the company, while some investors who want a major stake in the company hold more than 20 per cent through ABN Amro Nominees Singapore. They want to acquire a major stake," a source who investigated the deal said.

"This forced Kitti urgently to propose at a shareholders' meeting, bypassing the board, the issue of 200 million new common shares to sell through private placement. This would dilute the shares of existing shareholders by nearly half, so the investors planning to acquire the major stake in the company could not take over the firm."

The SET categorises Noble as a listed company with substantial shareholders, so last Friday it ordered it to comply strictly with the principles of good corporate governance and equitable concern for shareholders' benefits in order to sustain its growth and also build trust and confidence among shareholders and investors.

At their annual meeting on April 28, shareholders representing 46.3 per cent of all outstanding shares proposed to add an item to the meeting's agenda. The item was a proposal to increase the company's registered capital by issuing 200 million shares to be offered as a private placement. That amounts to a 43.81-per-cent increase in of paid-up capital.

This is a significant item that affects shareholders' benefits, and according to standard practice, the company should have informed the shareholders about the proposal before the annual meeting. The SET required the company to clarify why there was no such advance notification.

The company replied that before the meeting, a shareholder told the chairman that the company should consider adjusting its financial structure and to increase registered capital.

However, the other members of the board had not been informed about the additional agenda item before the meeting.

Shareholders were also concerned that the company's debt-to-equity ratio was high. The offering of shares under private placement is a convenient way of raising funds within a short period, and the process is not complicated. The board and the audit committee viewed the additional agenda item as lawful and appropriate.

According to the principles of good corporate governance, Noble should have ensured that its board had carefully considered this matter and allowed sufficient time for shareholders to study the information.

A shareholder in a management position should not propose or support a proposal to add any significant agenda item that was not relayed to shareholders in advance, unless there was an urgent need.

The company advised the SET on Friday that it had consistently complied with and operated its business according to the principles of good corporate governance. With regard to the additional agenda item, it was proposed by shareholders, not the company.

Since the shareholders exercised their right to propose agenda items as provided by law, the company had to proceed by taking into account the equitable benefits of all shareholders and the laws and regulations.

The company vowed that it, its board and its management would strictly comply with the principles of good corporate governance in all respects, as requested by the SET.

Noble Development's first-quarter net profit plunged 46 per cent to Bt115.17 million from the same quarter of last year because its revenue from transfers of ownership had decreased. Its revenue from the sale of real-estate projects in the first quarter reached only Bt704.66 million, down by Bt580.67 million from the same quarter of the previous year, because most of its condominium projects were still under construction.


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