Income Insurance’s minority shareholders back to square one in wake of failed Allianz deal

Retiree John Tay and his wife are among the 16,000 or so Income Insurance shareholders who are again in limbo.

This comes after German insurer Allianz on Dec 16 said it would withdraw its proposed offer to buy a 51 per cent stake in local insurer Income.

The 65-year-old and his wife hold about 4,000 shares.

They have been shareholders of Income Insurance since the 1990s, when it was still a cooperative.

The collapse of the proposed deal came two months after the Government intervened and amended the Insurance Act, and five months after the preliminary offer was made public.

Mr Tay said now that Income is corporatised and self-sustaining, it is very different from when it was a cooperative and received grants.

He asked if Income, now a corporate entity, should continue with the social mission role and “force minorities like us to partake in the social mission”.

“Must minority shareholders (who are mostly individuals) personally fund the social mission initiatives?” Mr Tay said.

Another minority shareholder who spoke on condition of anonymity told The Straits Times that the silent minority are left in the wake of the firestorm and are the ones most affected.

“I am disappointed at this outcome, like many of the retiree shareholders I met at the last annual general meeting, who have held on to Income’s shares for decades and have been looking forward to cashing out the shares,” the shareholder said.

He added that minority shareholders are now left with the “suboptimal” option of “willing buyer, willing seller” transactions “in an inefficient market that is neither public stock exchange-based nor is it liquid”.

Minority shareholders can still sell their Income shares as long as they can find a buyer willing to pay a price both parties agree on.

But the two minority shareholders hope NTUC Enterprise, parent of Income, can make a general offer to buy them out.

Both Income and NTUC Enterprise declined comment.

Like some others, the two minority shareholders also hope that the offer can be on a par with the price of $40.58 per share as initially offered by Allianz.

But such a price would no longer hold, given that the Allianz deal is off the table, sources told ST.

They said Income will address shareholders’ questions at its upcoming annual general meeting around mid-2025.

Allianz’s proposed offer was blocked by the Government over concerns about the deal structure and questions about whether Income could continue its social mission.

When Income was corporatised in 2022, it had to change its legal structure from a cooperative to a company.

Back then, Income sought and was allowed to carry over a sum of $2 billion to the new corporate entity. This was capital to run the business and meet legal and regulatory requirements.

Under the law, when a cooperative is wound up, the money has to go back to the Co-operative Societies Liquidation Account to benefit the co-op movement in Singapore.

On the suggestion for NTUC Enterprise to buy out minority shareholders, Mr Robson Lee, a partner for law firm Kennedys Legal Solutions, told ST that Income needs the retained earnings to fund its operations and social objectives.

Thus, a share buyback would not be prudent.

Mr Lee said most corporate investors prefer to invest in new shares of Income, so the funds invested are retained in the company.

“Buying out existing shareholders would mean the new investor has to fork out money to buy out these shareholders, and then subsequently invest a further substantial sum in the company to fund its working capital needs after the share buyout,” he said.

The requirement to structure the company to ensure the continuity of its social mission will further deter investors from embarking on such a transaction, the lawyer noted.

Ms Stefanie Yuen-Thio, joint managing partner at TSMP Law, noted that Income will need to find a partner or an investor prepared to come in on terms that meet all stakeholder requirements.

The tone of the recent announcements showed that the quest for a strategic partner is not a pressing immediate need, she said, adding that the investor will have to be in the same or an adjacent industry where economies of scale would apply.

“Clearly, the much-quoted ‘social mission’ of Income to provide affordable healthcare for Singaporeans is the most important factor.

“That will be one of the terms that the deal team will need to enshrine in the documents, perhaps by securing an undertaking that certain basic insurance coverage will continue to be provided,” Ms Yuen-Thio added.

Former Nominated MP Calvin Cheng, who is familiar with the business and political circles, noted that Income’s prospects of a sale are “very bleak”.

“Even an initial public offering (IPO) offers a bleak prospect. Despite all the nativist drum-beating, I doubt Singaporeans will put their money where their mouth is and support an Income IPO.

“The best Income can do now is to hobble along as a local social enterprise, propped up by union funds, and hope that another black swan event like Covid-19 doesn’t come along to test its financial resilience,” he said.

Mr David Gerald, president and chief executive of the Securities Investors Association Singapore, said it is back to “square one” for all the minority shareholders, who can sell their shares only to willing buyers in the open market.

“Going forward, it will be ideal if there is another company which is able to offer a balance of social mission and good exit offer to Income shareholders.

“While we hope to have the best of both worlds, we trust that the Income board and its management will make the best decision in the interest of the company as well as (that of) all the stakeholders,” he said.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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