SET-listed Stark Corporation is entering an arbitration dispute with German firms Leoni AG and Leoni Bordnetz-Systeme GmbH, which claim €608 million from the company, citing a violation of their sales and purchase agreement.
According to a Stark filing to the Stock Exchange of Thailand on June 12, the case refers to last year's exercise of withdrawal rights under an agreement between Stark and the German firms.
Following the withdrawal rights exercise, the two firms filed an arbitration case with the German Arbitration Institute (DIS) on March 2, 2023.
The claimants estimated the total claim amount at €608 million. They claimed Stark violated its obligation under the agreement for the purchase price of €598 million, along with preliminary compensation of €10 million.
Stark's board resolved on June 9 to acknowledge participation in the arbitration case in order to protect the company's interests, and to approve the submission of a response and counterclaim with the DIS, tentatively scheduled for June 19.
According to the company's filing to the SET on Dec 13, 2022, Stark's board convened on May 23, 2022, and had an extraordinary shareholders' meeting on Sept 23, 2022 that approved entering into a share purchase agreement with Leoni AG and Leoni Bordnetz-Systeme GmbH. The proposed acquisition was for 100% of shares in Leoni Kabel GmbH, a limited liability company registered under German laws, and Leonische Holding Inc, a corporation registered under the laws of Delaware in the US. The deals have a ceiling purchase value of €560 million.
The filing said over the past few months, there have been several events, adverse changes and new information from the time the company entered into the transaction, resulting in a material negative financial impact on the target companies' business as a whole, affecting the viability of the transaction. The filing said these changes could not have been anticipated at the time the share purchase agreement was signed.
Stark decided to exercise its rights under the agreement to withdraw from the purchase.
In a separate matter, Stark's bondholders asked the Securities and Exchange Commission to urge the company to speed up finishing its special audit report.
Stark previously indicated via the SET's disclosure system that it plans to submit the reviewed financial statements for last year by June 16. The company is in the process of appointing a team to conduct a special audit and said it expects to clarify progress on the audit by June 15.