Wecon Holdings Limited: Major Privatisation Proposal, Delisting, and Shareholder Implications

Introduction

Wecon Holdings Limited (“Wecon” or “the Company”, stock code: 1793) and its controlling shareholder, Triple Arch Limited (“the Offeror”), have jointly announced a proposal for the privatisation of Wecon by way of a scheme of arrangement under Section 86 of the Companies Act of the Cayman Islands. This scheme, if approved and implemented, will result in the delisting of Wecon from the Main Board of the Stock Exchange of Hong Kong. Trading in Wecon’s shares, which was previously halted, will resume at 9:00 a.m. on 17 March 2026.

Key Points of the Privatisation Proposal

• Privatisation Method: The Offeror proposes to privatise Wecon by cancelling all shares not already owned by the Offeror via a court-sanctioned scheme of arrangement.
• Scheme Shares: 200,000,000 shares (25% of issued shares) are held by Scheme Shareholders (including 6,796,000 held by a trustee under the Award Plan). The remaining 600,000,000 shares (75%) are held by the Offeror and will not be cancelled.
• Cancellation Price: Scheme Shareholders will receive HK\$0.28 in cash for every Scheme Share cancelled. The Offeror will not increase this price.
• Total Consideration: The cash consideration required for the scheme is HK\$56,000,000, to be funded from the Offeror’s internal resources.
• Delisting: Upon effectiveness of the scheme, all Scheme Shares will be cancelled and Wecon’s listing on the Stock Exchange will be withdrawn.

Details of the Proposal and Shareholder Implications

1. Scheme Mechanics

• All Scheme Shares (except those held by the Offeror and parties acting in concert) will be cancelled for HK\$0.28 per share in cash.
• Immediately after cancellation, an identical number of new shares will be issued to the Offeror, restoring the company’s share capital.
• If any dividends or other distributions are declared after the announcement but before the scheme is effective, the Cancellation Price will be reduced by an equivalent amount. As of now, the Company has declared it does not intend to declare or pay any dividends until the scheme is implemented or lapses.

2. Award Plan Shares

• As of the announcement, 6,796,000 shares are held by a trustee under the Award Plan and will be cancelled under the scheme, with the trustee receiving the Cancellation Price.
• The Award Plan will be terminated upon the scheme becoming effective, and the proceeds (net of expenses) will be remitted to the Company.
• Trustee shares will not be voted at the Court Meeting or EGM.

3. Share Price and Value Analysis

• Premium to Historical Prices: The HK\$0.28 Cancellation Price represents a significant premium over historical undisturbed trading levels:
  • +27.9% over the last undisturbed closing price (HK\$0.219)
  • +35.9% over the 60-day average (HK\$0.206)
  • +46.6% over the 180-day average (HK\$0.191)
• Discount to Recent Peaks: The price is, however, a 13.8% discount to the last trading price before suspension (HK\$0.325) and a 23.3% discount to the highest closing price in the past six months (HK\$0.365).
• Net Asset Value: The Cancellation Price is below the latest audited (HK\$0.345 at 31 March 2025) and unaudited (HK\$0.341 at 30 September 2025) net asset values, representing discounts of 18.8% and 17.9% respectively.
• Trading Liquidity: Liquidity has been very low, with recent daily trading volumes representing just 0.04%-0.07% of total shares. The scheme allows shareholders to monetise their holdings at a premium to historical averages despite limited market liquidity.

4. Rationale and Benefits

• For Shareholders: Opportunity to realise investments for cash at premium to longer-term trading prices, despite recent unexplained trading surges.
• For the Company: Delisting will reduce administrative and regulatory costs, and privatisation is seen as necessary because the listing has not provided a useful fund-raising platform due to persistently low liquidity.

5. Offeror’s Intentions

• Post-privatisation: The Offeror intends to maintain Wecon’s business as is, with no major changes to employment or assets other than in the ordinary course of business.

6. Conditions and Process

• The proposal is subject to a number of conditions, including:
  • Approval of the scheme by at least 75% in value of Scheme Shares voted at the Court Meeting, with no more than 10% voting against.
  • Special and ordinary resolutions at the EGM (including a 75% majority to reduce share capital, and a simple majority to issue new shares to the Offeror).
  • Sanction by the Grand Court of the Cayman Islands.
  • Other regulatory and legal approvals.
• If the Scheme Fails: Should the scheme not be approved, the Company will remain listed. The Offeror (and its concert parties) will be restricted from making another offer for 12 months, unless the SFC Executive consents.

7. Timeline and Next Steps

• The Scheme Document, containing full details, recommendations, and meeting notices, will be sent to shareholders as soon as practicable, and no later than 8 April 2026 (subject to regulatory approval for any extension).
• Shareholders will be given notice of the last trading day and the effective date of the scheme and delisting.

8. Governance and Independent Recommendations

• An Independent Board Committee comprised of all independent non-executive directors has been formed to advise Independent Scheme Shareholders.
• Gram Capital has been appointed as the Independent Financial Adviser.
• Ms. Chan Lok Man (non-executive director) is excluded from the committee due to family ties with controlling shareholders.

9. Other Key Information and Disclosures

• There are no outstanding options, warrants, or convertible securities of the Company.
• No party has offered any consideration or special deal to any Scheme Shareholder other than the published Cancellation Price.
• The Offeror and parties acting in concert have not traded in the shares in the six months prior to the announcement.
• Shareholders and their associates are reminded of their obligation to disclose dealings in Company shares under the Takeovers Code.
• Overseas shareholders should be aware of possible legal restrictions regarding participation in the scheme and are advised to seek professional advice where necessary.
• US investors are reminded that the scheme is not subject to US tender offer rules and may have different disclosure and procedural requirements.

Potential Share Price Impact and Price-Sensitive Issues

• Privatisation and Delisting: If approved, the scheme will provide a cash exit at a significant premium to longer-term trading prices but at a discount to the most recent market price and NAV. This could result in share price volatility as investors reassess the value of their holdings.
• Final Offer Price: The Offeror has stated that HK\$0.28 is the final price and will not be increased, a critical factor for shareholders considering whether to support the scheme.
• Risk of Failure: If the scheme does not proceed, the share price could fall, given the absence of a liquidity event and the Company’s low trading volumes and lack of fund-raising ability.
• Unusual Recent Trading: The company notes an unexplained surge in share price and volume before suspension. The current offer price is at a notable discount to these recent peaks, and shareholders should carefully consider this when voting.

Financial Highlights

• Revenue: HK\$1,058.7 million (year ended 31 March 2025)
• Net profit: HK\$7.4 million (year ended 31 March 2025)
• Net assets: HK\$276.2 million (as at 31 March 2025)
• Unaudited net assets: HK\$273.0 million (as at 30 September 2025)

What Should Shareholders Do?

• Carefully review the forthcoming Scheme Document and advice from the Independent Board Committee and Financial Adviser.
• Consider the final offer price relative to historical trading levels, recent market prices, and the Company’s net asset value.
• Note that the offer is final and will not be increased.
• Assess your own need for liquidity and views on the Company’s future prospects if it remains listed versus being privatised.
• Consult professional advisers if uncertain, especially if you are an overseas or US-based shareholder due to specific legal and tax implications.

Important Warnings

• The proposal is subject to approval by independent shareholders, the Grand Court, and other regulatory conditions. There is no guarantee the scheme will proceed.
• If you are in doubt as to the action you should take, consult your stockbroker, bank manager, solicitor, or other professional adviser.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell securities. Investors should carefully review the official Scheme Document and seek independent professional advice before making any investment or voting decision regarding Wecon Holdings Limited. The information above is based on official company announcements and may be subject to change.

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