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The Hong Kong Securities and Futures Commission (SFC) announced that it has commenced proceedings in the Market Misconduct Tribunal (MMT) against Magic Holdings International Limited (Magic) and its nine directors for failing to disclose inside information as soon as reasonably practicable on the potential acquisition of its issued shares by L’Oréal S.A. (EPA:OR), a French cosmetics group in 2013.
The nine directors include its chairman, Mr Stephen Tang Siu Kun, three executive directors, Mr She Yu Yuan, Mr Luo Yao Wen and Mr Cheng Wing Hong, as well as five non-executive directors, namely, Mr Sun Yan, Mr Chen Dar Cin, Mr Yan Kam Tong, Mr Yang Rude and Mr Dong Yin Mao.
The SFC found that Magic and L’Oréal had discussions related to L’Oréal’s proposal to acquire the shares of Magic on several occasions since early March 2013. On one occasion, Tang, She, Luo and L’Oréal’s representatives reached a preliminary agreement regarding the sale of all the issued shares of Magic during a meeting on 29 March 2013.
On 15 August 2013, Magic announced that L’Oréal had put forward a proposal of acquiring all the issued shares of Magic by way of a scheme of arrangement and upon the acquisition becoming effective, all the shares of Magic would be cancelled in exchange for $6.3 in cash for each share. After the announcement, the share price of Magic rose 19 per cent to $6.01 on 16 August 2013, up from its previous close of $5.05 on 9 August 2013.
The SFC alleges that Magic had failed to comply with the requirement under the statutory corporate disclosure regime by not disclosing inside information relating to the potential acquisition by L’Oréal until August 2013 despite having reached a preliminary agreement on the structure of the potential acquisition on 29 March 2013.
The SFC further alleges that the conduct of Tang, She, Luo and Cheng had resulted in Magic’s alleged breach of the disclosure requirement and that all nine directors of Magic at the material time had failed to take all reasonable measures to ensure that proper safeguards exist to prevent the alleged breach of the disclosure requirement by Magic.