Monday, July 23, 2018

Top Glove's Troubled Acquisition

This has been well documented. The RM1.37bn purchase by Top Glove was completed only on April 4th this year. Secondly, the purchase was completed within 4 months.

PETALING JAYA: Top Glove Corp Bhd, whose shares tumbled as much as RM3.63 or 30% on Monday, said an investigation by an independent accounting firm showed that it overpaid RM640.5 million for the acquisition of Aspion Sdn Bhd.
Irregularities were discovered in certain balance sheet items of Aspion after it was taken over by Top Glove on April 4. Top Glove paid a whopping RM1.37 billion for Aspion.
"From the interim report given by the independent accounting firm, there is currently an overstatement of inventory, plant and machinery in Aspion's accounts amounting to RM74.4 million. Further, the interim report also states that the acquisition price of Aspion was overstated by RM640.5 million. Therefore, the claim amount of RM714.9 million in the legal proceedings consists of the overstatement of assets and the overvaluation," it told Bursa Malaysia on Monday.
Top Glove said, however, the litigation will not impact Aspion's business operations, which will continue as usual. It also stressed that the group's business operations remain resilient and scalable, with a healthy cashflow.
"Top Glove remains upbeat in terms of outlook. With the combined capabilities of Aspion, the group is confident of continued growth going forward. It recognises there will always be challenges in business and is focused on taking immediate steps to address the issues."

There were glaring questions still not covered by the journalists.

Who were the advisors for Top Glove? 
What actually did they advised? 
Who did the due diligence? 
Was it a limited due diligence, if so, there should be clawback, e.g. staggered payments till full due diligence is done.
Why was full sum paid prior to a full due diligence?
Was it too rushed? 
If so, why the rush? 
Where was the board's view in the scheme of things?
Were the advisors well versed with billion ringgit acquisitions? 
Where was the due diligence? 
Who were the accountants for the private company beforehand? 
How did they not qualify the financials before?

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