The controversial public tender offer of Yageo by Orion Investment Co.Ltd. has gained huge market attention. During an extraordinary Yageo board meeting on April 12, the board recommended that, even though the price of tender offer was reasonable, shareholders should decide for themselves whether to sell their holdings. The board also concluded that a merger between the two will take place in the future and be conducted in cash, with Yageo being the dissolved company. The public tender offer case seemed to have received the approval from both sides. The SFIPC had urged Yageo to form an independent review committee to review the price and reasonableness of the public tender offer to protect shareholders’ rights and avoid disputes. The Center deeply regrets Yageo’s non-compliance and disapproves of any recommendations, such as the price of the public tender offer that the Yageo board made to shareholders.

In a bulletin issued on April 12, Yageo said that its director Lin Lai-fu had consulted with a review committee on the public tender offer. Yet in reality, the company never revealed the structure of the committee and any opinions whatsoever the committee had made with regard to the price and reasonableness of the public tender offer. While Yageo commissioned KPMG Corporate Finance Co. Ltd. and the China Intangible Asset Appraisement Company to assess the price of the public tender offer, the two only provided consultation service and could not perform the functions of a review committee, which not only does price evaluation but also assesses the overall reasonableness of the public tender offer. Yageo has never provided a full explanation on this; it seems the price and reasonableness of the public tender offer was decided by Lin alone, based on the advice he received from consultants and appraisal firms. This is against the spirit of objective assessment by an independent review committee, as specified in Article 12 of the “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies.”

The SFIPC noted that an independent review committee is needed because most of the board members have an interest in the public tender offer and should not be involved directly in the decision-making process, which should be left to the review committee. As it turned out, decisions regarding the merger were made by Lin alone, instead of by an independent review committee tasked with assessing the price and reasonableness of the public tender offer to protect shareholders’ rights.

The SFIPC points out that Yageo has apparently ignored requests by the Center as well as the public that an independent review committee be set up to conduct objective and neutral assessment over the price and reasonableness of the public tender offer. As a result, the SFIPC does not approve of any recommendations regarding the public tender offer that the Yageo board made to shareholders.