NTUC central committee unaware of capital reduction plan

The labour movement’s central committee did not know of the plan to return $1.85 billion to shareholders under the Allianz-Income deal before it was mentioned in Parliament on Oct 14, said NTUC deputy secretary-general Desmond Tan.

Speaking in Parliament on Oct 16, Mr Tan said the central committee had been briefed by Income Insurance and its parent company, NTUC Enterprise, on the strategic imperatives of the deal, but the capital reduction plan was not highlighted to it.

As Income is a non-listed public company, it would have to comply with the legal responsibility of non-disclosure of commercially sensitive information on Allianz’s plans post-acquisition, he said.

Mr Tan made the point in response to questions from Non-Constituency MP Leong Mun Wai and Nominated MP Raj Joshua Thomas during the debate on the Insurance (Amendment) Bill, adding that Income is subject to the Singapore Code on Take-overs and Mergers.

The capital reduction plan is a key factor in the surprising turn of events that saw the Government block the hotly debated $2.2 billion deal between Income and German insurer Allianz that was first made public in July.

Allianz had made an offer to buy a controlling stake of at least 51 per cent in Income.

On Oct 14 in Parliament, Minister for Culture, Community and Youth Edwin Tong said in a ministerial statement that the Government had decided it would not be in the public interest for the transaction to proceed in its current form.

While the Government does not have concerns over Allianz’s standing or suitability to acquire a majority stake in Income, the concerns lie in the terms and structure of this specific transaction, particularly in the context of Income’s corporatisation exercise, he said.

Mr Tong added that before the deal was raised in Parliament in August, his ministry had not seen the plan for Income to return some $1.85 billion in cash to its shareholders within the first three years after completion of the transaction.

During the debate on the Insurance (Amendment) Bill on Oct 16, Mr Tan explained why NTUC had supported the proposed deal.

When NTUC was briefed on the proposal, it was difficult for the unions to learn that Income was planning to sell a majority stake to Allianz, given the company’s history as the labour movement’s first social enterprise, said Mr Tan, who is Senior Minister of State in the Prime Minister’s Office.

But NTUC Enterprise went into the deal to strengthen Income in the longer run as it recognised the challenges that Income had been facing amid a more competitive and tightly regulated insurance landscape, he noted.

“The NTUC central committee agreed with the strategic intent and approached it in good faith,” he said.

He also clarified that NTUC, as a major shareholder of NTUC Enterprise, does not get involved in the day-to-day running of operations.

It delegates to the board of NTUC Enterprise the responsibility of making decisions pertaining to all businesses.

Mr Tan also noted that Second Minister for Finance Chee Hong Tat had acknowledged that NTUC had acted in good faith and in the interest of workers and members.

“If you look at it, the Government and NTUC share the same strategic intent and broader objectives for Income and the co-op movement,” said Mr Tan.

“But as far as the specifics of this transaction are concerned, there is now perhaps a difference in view,” he added, referring to the concerns Mr Tong had raised about the deal.

He added that NTUC has reviewed the matter and accepts the Government’s considerations and decisions on the proposed transaction.

“We note that the Government remains open to any arrangement that Income may wish to pursue, whether with Allianz or any other partners, so long as the concerns highlighted are fully addressed.”

Mr Tan added that Income has committed to study carefully the implications of the ministerial statement by Mr Tong and the amendments of the Insurance Act, and will work closely with the relevant stakeholders to decide on the next course of action.

“The labour movement – which includes NTUC Enterprise and NTUC – is united in (its) purpose and we will continue to do right by our people, and what is necessary for the longer-term interest to serve workers and the people of Singapore,” he said.

In a Facebook post on the evening of Oct 16, labour chief Ng Chee Meng said the decision to halt the Allianz-Income deal and its implications were of key concern to the labour movement and union leaders who had supported the deal.

He added that Deputy Prime Minister Gan Kim Yong, Mr Tong and Mr Chee held an “honest and productive engagement” with NTUC and union leaders to clarify issues after the Parliament sitting.

“NTUC respects and accepts the Government’s decision that the transaction cannot proceed in its current form,” he said.