Stark faces 23 billion baht arbitration dispute with German firms Leoni AG

Stark Corporation, a SET-listed company, is facing an arbitration dispute with German firms Leoni AG and Leoni Bordnetz-Systeme GmbH. The German firms are claiming 608 million euros (23 billion baht) from Stark, alleging a breach of their sales and purchase agreement, Bangkok Post reported.

According to a filing to the Stock Exchange of Thailand yesterday, the case refers to Stark’s exercise of withdrawal rights under an agreement with the German firms last year. Following this, Leoni AG and Leoni Bordnetz-Systeme GmbH filed an arbitration case with the German Arbitration Institute (DIS) on March 2.

The claimants have estimated the total claim amount at 608 million euros, asserting that Stark violated its obligation under the agreement for the purchase price of 598 million euros, along with preliminary compensation of 10 million Euros.

On June 9, Stark’s board resolved to acknowledge participation in the Stark arbitration case to protect the company’s interests and approved the submission of a response and counterclaim with the DIS, which is tentatively scheduled for June 19.

According to the company’s filing to the SET on December 13, Stark’s board convened on May 23, 2022, and held an extraordinary shareholders’ meeting on September 23, 2022, approving a share purchase agreement with Leoni AG and Leoni Bordnetz-Systeme GmbH. The proposed acquisition involved 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 had a ceiling purchase value of 560 million euros.

The filing stated that over the past few months, several events, adverse changes, and new information have emerged since the company entered the transaction, resulting in a material negative financial impact on the target companies’ business as a whole and affecting the viability of the transaction. These changes could not have been anticipated when the share purchase agreement was signed.

Stark decided to exercise its rights under the agreement to withdraw from the purchase.

In a separate issue, Stark’s bondholders have requested the Securities and Exchange Commission to encourage the company to expedite the completion of 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 expects to clarify progress on the audit by June 15, reports Bangkok Post.