LCY Chemical Corp (李長榮化工) has shed light on its takeover by KKR & Co after the Securities and Futures Investors Protection Center ruled that LCY’s disclosure to investors was inadequate.
In a filing to the Taiwan Stock Exchange on Thursday evening, LCY said that former LCY chairman Bowei Lee (李謀偉) and other members of the founding Lee family would be taking a 45 percent stake in an entity that controls Carlton (Luxembourg) Holdings SARL at the price of NT$100 per share.
The filing said that the 45 percent stake would be controlled by six parties of the Lee family, divided into parcels of 15.89 percent, 15.8 percent, 3.74 percent, 7.97 percent, 1.33 percent and 0.27 percent.
Carlton is an associate and a member of a consortium led by KKR that has been tasked with carrying out LCY’s takeover via a share swap.
Industry experts have said that the Lee family could run into conflict of interest issues as family members become shareholders of the firm buying LCY.
While the share swap is not available to LCY’s current shareholders, it still requires their approval in an extraordinary shareholders’ meeting on Monday next week.
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In the filing, KKR said that it and the Lee family have borrowed US$870 million from banks to go with US$650 million of its own funds to carry out the deal.
KKR said that the Lee family would have to come up with another US$290 million to buy the stake in Carlton via an issuance of 200 million new shares.
LCY is seeking to transition its business through the deal, but the risks associated with failure are now on the shoulders of KKR and the Lee family, the New York-based investment firm said.
KKR said that the Carlton shares acquired following the takeover would not pay dividends and would have no liquidity in the next five years.
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