Trading was within price ranges set by analysts, it says

The Singapore Exchange (SGX) said that it takes a serious view of all market misconduct in breach of the Securities and Futures Act, including potential insider trading and manipulation activities.

The regulator was responding yesterday to news reports highlighting Olam's escalating share price ahead of Temasek Holdings' offer for the company last Friday. In the six weeks since Feb 3, Olam's counter had jumped 34.8 per cent, leading market watchers to ask if some had gotten wind of the deal. Others questioned why Olam did not request for a trading halt earlier, and was not queried by SGX.

" We will spare no effort in conducting investigations on possible transgressions and will cooperate with regulatory agencies to enforce the law against offenders," SGX said in its statement.

Under new rules which came into effect on March 3, listed companies are required to inform the bourse if their board is aware of discussions of a potential proposal, or in talks on an agreement which may lead to a takeover of the company.

SGX did not indicate whether it had been notified by Olam but said: " We do not discuss our dealings with regards to individual companies, including notifications as required under the listing rules. If there are possible breaches of rules or requirements, we will investigate and take appropriate action."

Olam declined to comment. Said a spokesman: " The offer made by Breedens Investments is subject to the Takeover Code, and we have been advised that we should not make any comment on the offer except by way of a board-approved announcement."

Temasek unit Breedens Investments Pte Ltd is leading a consortium to put up $2.53 billion to buy the rest of Olam that the group does not own. As at last Friday, the group owned a combined stake of 52.5 per cent.

Asked if it had notified SGX of the intended offer, Temasek declined comment and said: " All our discussions with the regulators are on a strictly confidential basis."

Besides requiring companies to keep material information confidential, the new rules which kicked in this month also require them to keep a list of names of persons privy to the transaction, requestable by SGX as and when necessary.

In its response, SGX also sought to put Olam's share price jump into context. Olam's 34.8 per cent price jump in the six weeks leading up to the takeover announcement had surpassed those of its peers, Wilmar International which rose 11.2 per cent, and Noble Group which rose 12.6 per cent over the same period.

SGX said that trading in these three stocks were within the price ranges set out in analysts' research reports, suggesting that they were trading within the general market view, with Olam shares reflecting a more positive market view.

It noted that of the 13 analysts who issued reports on Olam in February, seven had raised their target price by an average of 10.4 per cent, with the highest increase being 21.4 per cent. Target prices for the stock ranged from $1.50 to $2. Olam ended Friday at $2.23, which was the offer price.

In Wilmar's case, eight analysts raised their target price by an average of 2.6 per cent, with the highest increase being 4.8 per cent. For Noble, one analyst raised its target price in February.

" (Hence,) such comparisons should be conducted with care as the financials and outlook of individual companies may differ even if they are within the same industry," SGX noted.

Over the weekend, Carson Block, founder of US shortselling firm Muddy Waters which in November 2012 betted against Olam and said that the commodities trader faced insolvency risks, observed that the timing of Temasek's offer for Olam was " interesting" .

In an e-mail to media, Mr Block said: " The Singapore sovereign wealth fund's timing is interesting given that Olam has $1.2 billion of debt maturing this year and is still burning cash, and that the stock has inexplicably outperformed in the past month."