Broadway Industrial Group Limited Announces Selective Capital Reduction and Delisting Proposal

Key Highlights for Investors

• Exit Offer and Delisting: Broadway Industrial Group Limited (“Broadway” or “the Company”) has announced a proposed selective capital reduction as an exit offer for minority shareholders, alongside plans to delist from the Singapore Exchange Securities Trading Limited (SGX-ST).
• Majority Control Achieved: Following a mandatory general offer (MGO) in December 2024, the controlling shareholder, Patec Pte. Ltd. and its concert parties, now own approximately 96.22% of the Company’s shares.
• Suspension of Trading: Trading of Broadway shares has been suspended since 24 December 2024 due to the failure to meet free float requirements, leaving minority shareholders unable to exit their investment via the market.
• Exit Offer Price: S\$0.262 per share is offered for the capital reduction, representing a premium of 33% over the MGO offer price (S\$0.197), and up to 69% premium over the 12-month volume-weighted average price prior to the last undisturbed trading day.
• Total Payout: Approximately S\$4.52 million will be distributed to eligible minority shareholders, who collectively hold 17,265,407 shares.
• Shareholder Approval Required: The proposal requires approval from at least 75% of eligible shareholders at an EGM and confirmation from the Singapore High Court.
• Independent Advice: Xandar Capital Pte. Ltd. has been appointed as the Independent Financial Adviser (IFA) to guide minority shareholders.

Detailed Analysis

Background and Rationale

The controlling shareholder, Patec Pte. Ltd., completed the MGO in December 2024 and subsequent compulsory acquisition in April 2025, resulting in a holding of 96.22% of Broadway’s shares. This triggered a suspension on trading due to insufficient public float. The controlling shareholder has no intention to restore the public float or maintain the listing status.

The Board evaluated multiple options to enable minority shareholders to exit, concluding that a selective capital reduction is the fastest and most cost-effective approach. This method provides minority shareholders with a fair opportunity to realise their investment, especially since market trading is no longer available.

Exit Offer Pricing and Premiums

The exit offer price of S\$0.262 per share is significantly above historical trading levels:

• Premium of 37.89% (1-month VWAP), 37.17% (3-month VWAP), 42.39% (6-month VWAP), and 69.03% (12-month VWAP) prior to the MGO announcement.
• Premium of 33% above the MGO offer price (S\$0.197).
• Premium of 42.39% over the closing price on the last undisturbed trading day.
• P/NAV multiple implied by the offer is 1.23x, higher than average P/NAV multiples of 0.68x (1-year) and 0.71x (3-year).

The company’s unaudited NAV per share as of 30 June 2025 is S\$0.21, making the offer attractive compared to recent trading history.

Financial Impacts

• Share capital will be reduced from S\$113.16 million to S\$108.64 million after the selective capital reduction.
• Net assets will decrease from S\$99.4 million to S\$94.9 million.
• NAV per share will decrease slightly from 21.75 cents to 21.57 cents.
• Basic EPS will increase from 2.67 cents to 2.78 cents due to fewer shares in issue.
• Gearing ratio remains unchanged at 0.11x.

Process and Approvals

The exit offer and delisting require several key approvals:

• Approval from eligible shareholders at an EGM, with both the capital reduction and delisting resolutions being inter-conditional.
• Approval from the High Court of Singapore.
• Abstention from voting by the controlling shareholder and its concert parties in accordance with regulatory requirements and SIC exemptions.
• The IFA will provide independent advice to minority shareholders, and a circular containing full details and recommendations will be distributed before the EGM.

Strategic and Market Implications

The Board and controlling shareholder highlight several strategic considerations:

• The group expects softer demand in its key hard disk drive market due to geopolitical uncertainties, tariffs, and trade tensions. As a private company, Broadway can focus more flexibly on long-term strategies and operational efficiency.
• Delisting will remove the cost and administrative burden of maintaining listed status, allowing resources to be redirected to business growth.
• The company has not raised funds from the SGX-ST since 2014 and holds S\$32.1 million in cash, indicating no foreseeable need for public capital markets.

Important Considerations for Shareholders

• Price Sensitivity: The offer price is at a significant premium to historical prices, and acceptance will result in a full exit for minority shareholders, potentially affecting share valuation and liquidity.
• Conditionality: The exit offer is conditional upon shareholder and court approvals. If not approved, there is no guarantee of another exit opportunity.
• Voting Restrictions: The controlling shareholder and its concert parties will abstain from voting, ensuring decisions rest with minority shareholders.
• Exemptions: The Securities Industry Council has granted broad exemptions to facilitate the capital reduction, subject to conditions.
• No Irrevocable Undertakings: As of the announcement date, no shareholders have given irrevocable undertakings to vote in favour.

Timeline and Next Steps

• A shareholder circular will be released after SGX-ST approval, containing IFA advice and Board recommendations.
• An EGM will be convened for shareholders to vote on the resolutions.
• If approved, the company will seek High Court confirmation and, after completion, pay out the aggregate cash distribution and proceed to delist.

Disclaimer

This article is for informational purposes only and does not constitute financial advice or a recommendation to buy, sell, or hold any securities. Shareholders and potential investors should refer to the official circular and consult their own professional advisers before making any decisions regarding the proposals. The information herein is based on the company’s official announcement, and while care has been taken to ensure accuracy, no liability is accepted for errors or omissions.

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