SGX RegCo should require Aspen to provide regular updates on status of Honeywell deal
ASPEN (Group) Holdings should be pressed by Singapore Exchange Regulation (SGX RegCo) to provide more information and colour on why its glove unit' s US$210 million supply agreement with Honeywell International has not been " consummated" .
SGX RegCo should also require Aspen to provide a daily update on the status of this deal to ensure that investors are not blindsided by new developments that suddenly emerge.
Aspen announced that its glove making unit had secured the deal with Honeywell on April 13. But it retracted the announcement on April 24.
Aspen said in its retraction announcement that it had executed and delivered what it believed to be the final agreement with Honeywell on April 12, and invoiced Honeywell for the first payment of US$10 million the same day.
Aspen understood the " effective date" of the agreement to be April 12, and believed that Honeywell' s execution of the agreement to be imminent. So, it announced the deal the following day.
However, Aspen' s glove making unit was subsequently notified that Honeywell had not executed the agreement on April 12.
Aspen said in its retraction announcement of April 24 that the agreement remains unsigned.
Delayed retraction
On April 29, in response to queries from SGX RegCo, Aspen said it became aware of the non-consummation of the agreement by Honeywell on April 14.
So, why did it wait until April 24 to retract its announcement of April 13?
Aspen said in its response to queries from SGX RegCo that it had to liaise with officials at Honeywell, to clarify the reasons why the agreement had not been executed.
Given the 12-hour time difference between the US and Malaysia, most of the " communication turnaround" with Honeywell took more than 24 hours, Aspen said.
The company went on to say that after obtaining clarification from Honeywell, it prepared the retraction announcement. But this apparently also involved input from Honeywell. " After multiple exchanges of communication between the parties, the retraction announcement was officially approved by Honeywell on 24 April 2021 and the company immediately issued the retraction announcement to SGXNet after obtaining its internal approvals on the same day," Aspen said, in its April 29 response to queries from SGX RegCo.
Unanswered questions
Leaving aside the issue of whether the 24-hour " communication turnaround" between Aspen and Honeywell could have been negated with some late-night phone calls out of Kuala Lumpur, should Aspen not have issued its retraction announcement as soon as it became aware that Honeywell had not consummated the deal - that is, on April 14?
What more did Aspen need to know at that point other than that its assumptions about execution of the deal by Honeywell were wrong?
More importantly, is it now just a matter of time before the supply agreement is signed by Honeywell? Or is the deal dead in the water?
Aspen has consistently given the impression that it has done everything necessary to get the supply deal going, and that the ball is now in Honeywell' s court.
In its April 29 responses to queries from SGX RegCo, Aspen said it had been made aware that Honeywell needed to obtain internal approvals before it could execute the agreement.
Aspen also stated the agreement its glove making unit executed was not subject to any " express conditions precedent" , and that Honeywell had acknowledged receipt of the document and submitted Aspen' s initial invoice for processing.
On the other hand, Aspen published a " business update" on May 17 that led with the progress its glove unit is making, but that made no mention of the outstanding deal with Honeywell.
Three days later, on May 20, Aspen announced that the chief operating officer (COO) of its glove unit has quit to pursue other interests.
The COO, Ng Soon Ghee, had been appointed on Sept 22 last year and was still serving his probationary period.
He tendered his resignation on May 16, and it was accepted on May 19. His last day is June 17.
Regular updates
Aspen should provide more information and colour on its pending deal with Honeywell for the same reason that it believed it needed to quickly announce it on April 13.
Known more for being a property developer, Aspen is still at the very early stages of getting its glove making operations off the ground.
It was only last year that the company began talking about pursuing the business as a joint venture with CMY Capital, an investment firm reportedly linked to Malaysian businessman Chua Ma Yu.
On top of that, its US$210 million contract with Honeywell is clearly material.
Aspen reported earnings of RM72.7 million on revenue of RM282.8 million for FY2020. The group ended FY2020 with shareholders' funds of nearly RM566.3 million. It currently has a market capitalisation of some S$233 million.
In fact, after prematurely announcing its agreement with Honeywell, Aspen should arguably provide regular updates on the deal to ensure it does not become a driver of unwarranted speculation in its shares.
SGX RegCo could make this happen by issuing Aspen with a " notice of compliance" requiring it to publish a statement at the beginning of every market day on the status of its deal with Honeywell, including any new steps taken by either party to get it consummated.
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