By Mak Yuen Teen

On 20 April, ICP responded to SGX’s queries regarding the resignation of Stephen James Burt, Director of Travelodge Hotels (Asia) Pte. Ltd., a wholly-owned subsidiary of the Company. Mr Burt had resigned  with effect from 15 April and his resignation was announced by ICP that same day. On 17 April, I posted an article raising questions about the circumstances surrounding the resignation of Mr Burt.  I questioned whether the sponsor had asked the following questions:

a. Was Mr Burt required to serve any notice under his employment contract, and if so, why did he not serve out his notice to enable ICP to find a replacement?

b. Had Mr Burt already tendered his resignation earlier, and if so, when did he do so and why did ICP not announce it at that time?

SGX did not ask these questions. Instead, its four questions were as follow:

1. Was Mr Stephen James Burt a key management of the Group?

2. Who will be overseeing the hotel management business now?

3. How does his departure affect the operations of the hotel management business?

4. Has replacement been found?

I believe that SGX should have asked questions that would help establish whether ICP was late in announcing the resignation of Mr Burt – since as the company itself has confirmed, he is a key management of the Group and therefore his resignation should be material information which should be announced immediately – or whether he resigned without serving notice, which may give rise to other questions. However, the questions SGX asked are nevertheless relevant.

The company’s responses to SGX’s queries raise questions about earlier disclosures by ICP. For example, in response to who will be overseeing the hotel management business now, ICP said:  “Mr Marcus Aw, the Executive Director of Travelodge Hotels (Asia) Pte. Ltd. and ICP Ltd, had been overseeing the hotel management business and will continue to do so after the cessation of Mr Burt.”

32 year-old Marcus Aw is of course the son of the chairman and controlling shareholder of ICP, Mick Aw Cheok Huat, who is also the chairman of Datapulse Technology. When Marcus Aw was appointed as Executive Director of ICP on 5 November 2018, the announcement disclosed that he was Director of Travelodge Hotels (Asia) Pte. Ltd. and Vice-President, Finance and Development since July 2016. It was also disclosed that he “is responsible for the strategy, management and development of the Group’s hospitality segment”. Marcus Aw’s experience prior to joining ICP in July 2016 was as Associate Director (Finance) at MS Corporate Finance Pte Ltd (where Mick Aw is Managing Director) from July 2014 to July 2016, Associate (Private Equity) at Everstone Capital from January 2013 to July 2014, and Analyst (Corporate Finance) at Goldman Sachs from July 2010 to April 2012.

In response to the question as to how Mr Burt’s departure will affect the operations of the hotel management business, ICP said:  “Mr Burt’s background and experience was primarily in hotel investment and hotel brokerage. The Group brought him on board to assist in identifying hotel properties that could potentially be managed by Travelodge Hotels (Asia) Pte. Ltd. The hotel management operation was independently run by a team of experienced hospitality professionals with specialised experience in hotel operations, revenue management, IT, technical and design services, finance and brand and marketing. They continue to report to Mr Marcus Aw.”

The response seems to downplay Mr Burt’s hotel management experience. However, ICP’s annual report for the year ended 30 June 2018, dated 28 September 2018, said: “Mr. Burt has more than 30 years of experience across all facets of the hotel industry with leadership roles in hotel investment, hotel management companies, hotel brokerage and hotel funds management. Mr. Burt was previously the Managing Director of Hotels (Asia Pacific) at Colliers International. Prior to that, Mr Burt served as the Chief Executive Officer of Mirvac Hotels and Resorts, overseeing a portfolio of 45 hotels.” (emphasis mine).  When his resignation was announced on April 15, he was said to be “responsible for the hotel management business of the Group.”

The company’s description of Mr Burt’s experience in the annual report and the cessation announcement on April 15 do not seem to square with the company’s response to SGX. Further, in the same annual report, it was disclosed that Marcus Aw “was appointed on 4 July 2016 as Director and Vice President – Finance & Development of Travelodge Hotels (Asia) Pte. Ltd.”, which would seem to suggest a more limited role for Marcus Aw than what the company is now suggesting. Importantly, his prior experience in hotel management is nowhere near the experience that Mr Burt has, based on their respective backgrounds.

What has happened at ICP has implications for Datapulse Technology. At the EGM held on March 14, Datapulse sought and obtained shareholder approval for an IPT mandate for interested person transactions in respect of hospitality-related transactions, including hotel management services, with ICP Group – in the event that ICP group is appointed to provide such services to Datapulse. At the same EGM, Datapulse sought and obtained shareholder approval for the purchase of Hotel Aropa in Seoul.

If Datapulse’s shareholders had known about Mr Burt’s resignation, they would arguably have asked even more questions about the potential appointment of ICP to manage Hotel Aropa. Now that Mr Burt has resigned leaving behind a relatively inexperienced Marcus Aw in charge of the hotel management business at ICP, Datapulse shareholders should be even more concerned if ICP is now appointed – especially bearing in mind ICP’s short and loss-making track record in the hotel management business.

Datapulse shareholders’ predicament has much to do with the inadequate rules relating to interested person transactions in SGX Rulebook and the form-based approach that appears to be used when assessing change of control and whether there should be a mandatory general offer. I call on Datapulse’s independent directors to ensure that there is a proper and robust process for selecting the hotel management company to manage Hotel Aropa, and SGX to look into the circumstances of the appointment of ICP if it is indeed appointed.