The Analysis Of Offering Of Stapled Instruments On Malaysian Stock Market

• Published date: 09 January 2023
• Subject Matter: Strategy, Industry Updates & Analysis
• Law Firm: Azmi & Associates
• Author: Ms Serina Abdul Samad and Heu Wen Yen

In General

Stapled securities are two or more classes of securities issued by the same or different entities that are attached together, hence the name given. For starters, stapled structures may be listed on the stock exchange or even be unlisted.

Though a common stapling arrangement consists of a unit in a trust being stapled to a share in a company, it is not prescriptive and the stapling structure can vary to suit the objectives of the management¹.

The stapling itself is implemented by means of a contractual arrangement, usually in the form of a stapling deed which is the main instrument entered by both issuers of stapled securities². Terms of stapling deeds may vary, but in essence, their effect is to prevent the securities of the entities subject to the stapling deed from being traded separately.

This is then reflected in the constituent documents of the underlying entities which are amended to provide that their securities shall not be traded or transferred separately³.

Stapled Instruments in Malaysia

Presently in Malaysia KLCCP Stapled Group is the first and only stapled security listed on Bursa Malaysia since 2013. Initially, KLCC Property Holdings Berhad ("Company") was listed in 2004 but had undergone a restructuring, where three of the main buildings owned by the Company were injected into the KLCC Real Estate Investment Trust ("KLCC REIT") while the remainder of the assets remained in the Company.

The stapling resulted in an investor holding one unit of KLCCP Stapled Group owning both share in the Company share and unit in the KLCC REIT. It is important to note that the listing of such stapled securities was in fact not an offering - rather the prospectus was issued for information purposes only. The shareholders of the Company were not required to take any action nor make any direct payment to receive the Stapled Securities.

Figure 1: Stapled structure consisting of a company, a trust company which is similar to the structure of KLCC Stapled Group (see below Figure 2).

Figure 2: The chart above illustrates the structure of the KLCCP Stapled Group upon Listing
Source: KLCCP Prospectus dated 7 May 2013

Benefits of Stapled Instruments

In general, investors would prefer to have two securities which can be separately traded rather than stapled. This is unless the act of stapling increases the value of their investment. Hence, the question of how stapling might create value not only for issuers but also investors should be the consideration of...