Friday 9 September 2011

Sime Darby's E&O bid poses policy dilemma

The plot tickens and all the attention is on the SC. With the Chairman of the SC being married to the Chairman of E&O, who bought shares of E&O just before the takeover by Sime Darby, making things even more intriguing. It is time for SC's next move, and everybody is watching.


From The Straits Times, by Leslie Lopez, September 9, 2011:

Sime Darby, Malaysia’s financially bruised plantation-based conglomerate is presenting the country’s securities watchdog agency with an awkward policy dilemma with its acquisition of a 30 per cent interest in public listed property concern Eastern & Oriental (E&O) for RM 766 million.

Central to the widening public debate is whether the state-controlled group should be compelled to make a mandatory general offer for the remainder of E&O shares, a deal which could cost an additional RM 2.6 billion.

E&O is a property concern with lucrative rights to carry out large reclamation works in the northern island of Penang.

Critics of the deal argue that Sime Darby’s purchase of the block from three groups, including Singapore’s GK Goh Holdings, was structured in a way to circumvent the country’s takeover code.

But proponents of the transaction insist that Sime Darby was merely opting for a more cautious approach to its investment in E&O, and that a general offer could being the offing in the coming months.

In any case, the deal is presenting the Securities Commission Malaysia (SC) with a prickly regulatory problem over whether it should force Sime Darby to make an immediate general offer in the interest of protecting the rights of minority shareholders.

On a separate level, the brewing Sime Darby-E&O controversy has also put SC chairman, Tan Sri Zarinah Anwar, in a tight spot. That is because her husband, Dato Azizan Andul Rahman, who is also the E&O chairman, had raised his personal stake in the company just weeks before Sime Darby announced its proposed acquisition in E&O.

Ms Zarinah did not respond personally to queries posed by The Straits Times. But an SC spokesman said in a written response that the agency was “examining the circumstances surrounding the Sime Darby-E&O transactions for any Takeover Code implications, and will determine the action based on our findings”.

The spokesman added that the agency was “examining all transactions in the Sime Darby-E&O deal”.

……..

In recent days, Sime Darby executives have dismissed suggestions that the company was acting in concert with the sellers of the E&O shares, a situation that would definitely trigger a general offer.

But critics of the deal are not convinced. They note that Sime Darby, which is still recovering from heavy losses sustained from its foray into the oil and gas sector, would be negligent to its own minority shareholders for entering into a huge amount of capital without having some form of control.

How the SC decided will be crucial. There is already speculation that other shareholders of E&O are considering legal action to force a general offer.”

8 comments:

  1. Make people suspect it has something to do with coming General Election

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  2. Hi, I really don't know if the GE is coming soon.

    I like to keep politics and business separate. But unfortunately, the reality is that the two are (in Malaysia) much too close for comfort.

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  3. Oh my. We are examining? What is there to examine. The SC definitely at the snap of their fingers would be able to obtain detailed information of all the transactions prior to the S Darby purchase.

    I read somewhere today the Chairman stating that he was not aware of the potential deal? Common lah - brader. This is a huge corporate deal - the big stakeholders going to sell down their stakes and the Chairman tak tahu?

    I am actually intrigued that such deals are not so blatantly.

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  4. Yes, they have the information available at their finger tips, at least they should have.

    Do you have the link where the Chairman stated that he was not aware of the potential deal?

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  5. Here it is :

    http://biz.thestar.com.my/news/story.asp?file=/2011/9/8/business/20110908081944&sec=business

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  6. HI M.A. Wind, is this why you have relocated to Singapore after spending 16 years in Malaysia ?
    Jackie

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  7. Anonymous, thanks for the link.

    "The transaction does not require board approval and hence, was not discussed at the board level. As such, board members were not privy to the transaction and continued to trade in accordance with the prevailing rules and had made appropriate filings with Bursa Malaysia"

    From my own experience, a board that doesn't know that 30% of the shares changed hands, I would say that is almost impossible.

    Good chance that large share movements should be announced and/or approved according to the M&A and/or Shareholders Agreement. Thirty percent is a very significant change of ownership, all sort of things come into play, like the one that is now discussed, should there be an MGO or not.

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  8. Hi Jacky,

    I had applied for PR in Malaysia somewhere in 1999, was rejected, appealed and was stonewalled for 10 years. I applied in Singapore, immediately received my PR, returned home with a nice letter from the Singaporean Home Minister (they really do these things very professional), and that same day the phone went over, my PR in Malaysia was approved. Too late!

    For my wife it was clearly the rise in crime that we witnessed ourselves, for me it was also the corruption, Corporate Governance, bureaucracy etc.

    But I still believe in Malaysia, I invested in a few start up companies and still looking for more. With the right change, Malaysia could be completely transformed in say 5 years, I strongly believe that.

    ReplyDelete