Blast from the Past: Pan-Electric (3)

I wrote before about the Pan-Electric scandal, here and here.

I wrote before about the divorce battle of Khoo Kay Peng and Pauline Chai, here and here.

As expected in a bitter separation, lots of mud is being thrown at each other.

This blog usually doesn't focus on toilet seats nor about the number of shoes that one person has (Telegraph).

But another, more interesting revelation reveals a new link between the two above cases. From the Malaysian Insider website:

"Tycoon hubby sought Canadian citizenship to avoid arrest, ex-beauty queen claims".

Some snippets:


Billionaire Tan Sri Khoo Kay Peng had asked for a Canadian citizenship in the 1990s to avoid arrest by the Singaporean authorities, which was investigating a company belonging to him in the island state, his wife Pauline Chai told the High Court here today. Speaking during the couple’s highly publicised domicile trial here, the former Miss Malaysia claimed that Khoo had wanted to apply for permanent residency in Canada because the country had no extradition co-operation with Singapore. She said the tycoon had then feared for his life after some of his colleagues were arrested by the Singaporean authorities over allegations of mismanagement involving his company, Pan Electric Industries. “We had first stayed in Australia but when the Pan Electric fiasco (happened), two of his friends got investigated so we moved to Canada because they had no extradition laws there.

According to her affidavit that was sighted by Malay Mail Online, Khoo’s lawyers had first advised him and his family to move to Australia, where he, Chai and his children eventually settled down. But Chai claimed her husband fell into depression, as he was not certain if Australian laws could still prevent him from being extradited to Singapore.


This seems to be a new twist in the Pan-Electric case. What was known is the below information.

There are references in this newspaper clip from the Straits Times, some snippets:

A detailed article from The Ant Daily can be found here:

"The forgotten corporate high-flyer"

It appears that, due to the high-profile divorce case, the high-flyer is not that much forgotten anymore. If he likes that kind of attention is another matter.

The Pan-Electric case still seems to attract quite some attention, after all those years. And probably rightly so, it was the only case that brought the share markets of both Singapore and Malaysia to a halt for three days.

MUI's 428 million puzzle

The Edge Malaysia published an article "MUI's RM428m puzzle" about the debt of Malayan United Industries Bhd (MUI). Interesting about this case is:

• The amount is huge: RM 428 million (incl. accrued interest), for instance compared to the marketcap of MUI of about RM 600 million;
• The bulk of it is owed for more than ten years, quite stunning;
• Little progress has been made to recover the amount, only in 2011 the matter was taken to court;
• The amount is owed by the charitable Hope Foundation and its subsidiaries; according to MUI the deal is not a related-party transaction, which is puzzling because the Hope Foundation seems to be linked to MUI's controlling shareholder Tan Sri Khoo Kay Peng.

The last announcement about the debt:

I have written about the group before, most notably:

PMI, serious Corporate Governance Issues
PMI: more questions than answers

The link to the Hope Foundation is also mentioned, for instance in the last link:

"[1] The main issue is that the offerors bought their shares from (primarily) the Hope Foundation, and that this price is used for the price offered to the minority investors. But the Hope Foundation seems to be connected to the offeror, there are many indications to be found on the internet, for instance in an article in "Malaysian Business", the previous name was even "MUI Foundation" and the shares it traded in where all connected to the offeror. But if this is indeed the case (and it seems to be very likely), then that means there is a huge conflict of interest, it would be in the interest of the joint offerors to make an offer as low as possible to the Hope Foundation, instead of an arms length offer. It would also explain why a large shareholder (Hope Foundation) would sell its shares for about the lowest price ever. Although this issue seems to be obvious, and the authorities are aware of it, it is never raised in the offer document, not even once. There is simply no mentioning at all of the Hope Foundation."

In the mean time, the CFO of MUI, PM Holdings and MUI Properties resigned "to pursue other career opportunities".

Too many questions, and so far it appears that the authorities have not yet taken any action. The minority shareholders of the MUI group and the public at large deserve some much needed transparency in the above issues.

DailyMail: Chairman of MUI in divorce battle (2)

The Mail Online came out with another story about the divorce battle between Khoo Key Peng (who controls MUI and several other PanMalaysia companies like PMCorp and PMI) and  Pauline Chai.

The first round of mudslinging has started, for the details please click on the above link.

I have no idea which party will win, but as usual the lawyers will have a field day:

The case will see a battle between two of  Britain’s top divorce lawyers. Ayesha Vardag, known as the ‘diva of divorce’, is representing Miss Chai, while Fiona Shackleton, who has been nicknamed the ‘steel magnolia’ for her charm and determination, is acting for Dr Khoo.

Ahead of forthcoming preliminary hearings, Miss Vardag said: ‘This is the husband trying desperately to forum-shop [find a court which would give him the best result] himself out of English courts into Malaysia where Pauline has not lived since her youth and of which she is not even a citizen.

‘The English courts would share out the assets this couple built up over more than 40 years of marriage with five children on the basis of fairness. The Malaysian courts would give Pauline much less.’

"Dr Khoo, who is ranked the 36th richest man in Malaysia by US magazine Forbes, bought a 40 per cent stake in Laura Ashley in 1998."  

Most likely he bought this through one of his companies, MUI currently holds the shares, in other words Khoo owns a part of a company which owns a part of Laura Ashley.

"He also runs a global investment company, Malaysian United Industries."

Some would call it a global investment company, others would call it a penny stock, it usually trades around RM 0.20. The reason being that there is an unbelievable amount of shares outstanding, close to 3 Billion (but then again, compared to MAS that is peanuts, they just issued a rights issue of 13,368,624,960 ordinary shares).

Once the MUI group was the proud owner of MUI Bank, previously known as Kwong Lee Bank, now known as Hong Leong Bank. The whole stable of MUI/PM companies was hit very hard in the 1997/98 Asian crisis.

DailyMail: Chairman of MUI in divorce battle

The UK tabloid DailyMail reported the following:

Former Miss Malaysia could get £500m payout in Britain's biggest ever divorce settlement from multimillionaire husband

Pauline Chai, now 66, is divorcing Malaysian businessman Khoo Kay Peng Chairman of Malaysian United Industries has properties around the world The 74-year-old also owns a 40 per cent stake in Laura Ashley Divorce petition filed last month on grounds of 'unreasonable behaviour'

The 74-year-old also has a 40 per cent stake in Laura Ashley, which now has sales of £286 million a year, and is director of Corus Hotels Limited which owns ten hotels including the grand Corus Hyde Park Hotel.

Some more information at the website of The Times.

Certain assets are held by listed Malaysian companies (not by Khoo personally) in the MUI and Pan Malaysia stable (PMI and PMCorp), those companies also have liabilities and are owned by other shareholders.

One should therefore not count the value of the assets but of the shares of these companies, and the share prices of all these companies are languishing, they are all penny stocks.

There have been serious Corporate Governance concerns in all of them, as mentioned in this blog and much more in WhereIsZeMoola.

I therefore get the impression that the above amounts are widely overstated (at least as far as they relate to the assets in listed companies). Khoo Kay Peng is also not listed in the Top 13 of the richest Malaysians.

PMI: more questions than answers

PMI published its offer document for the take-over offer. To recap, the joint offerors, companies controlled by Khoo Kay Peng, offer RM 0.045 per PMI share, which must be one of the lowest offers ever recorded on Bursa Malaysia.

More information can be found here: http://cgmalaysia.blogspot.com/search/label/PMI

The offer document does not answer issues raised, and even adds some more. These kind of documents are supposed to deal with important issues, but in Malaysia they are very good in avoiding them.

[1] The main issue is that the offerors bought their shares from (primarily) the Hope Foundation, and that this price is used for the price offered to the minority investors. But the Hope Foundation seems to be connected to the offeror, there are many indications to be found on the internet, for instance in an article in "Malaysian Business", the previous name was even "MUI Foundation" and the shares it traded in where all connected to the offeror. But if this is indeed the case (and it seems to be very likely), then that means there is a huge conflict of interest, it would be in the interest of the joint offerors to make an offer as low as possible to the Hope Foundation, instead of an arms length offer. It would also explain why a large shareholder (Hope Foundation) would sell its shares for about the lowest price ever. Although this issue seems to be obvious, and the authorities are aware of it, it is never raised in the offer document, not even once. There is simply no mentioning at all of the Hope Foundation.

Here is a link from the website of Raja Petra, also about the Hope Foundation (I haven't been able to check the accuracy of the rather wild allegations though):

http://www.malaysia-today.net/mtcolumns/40479-tan-sri-dato-dr-khoo-kay-peng

[2] Investors who sold their PMI shares on August 24th or 25th for RM 0.040 will get half a cent extra per share, since the offer was already unconditional on August 24th. A pretty straight forward ruling, the announcement regarding the offer on August 26th was simply two days too late. The Securities Commission made this ruling on October 7th (good and fast action, I have to admit), PMI objected on October 10th (rather strange, it looks very clear that rules have been breached) and the SC overruled the objection. All correct, but why did the SC suddenly need 3.5 months to reach this conclusion, when their first ruling took less than two weeks? Because of this the whole process is hugely delayed. The impact will be very small, most trades on those two days were anyhow done at RM 0.045, investors have to reclaim their money if they made any on RM 0.040 and some will even have forgotten that they sold their shares those days. The total impact will be a few Thousand Ringgit at most. The delay by the SC is puzzling.

[3] The independent advisor will be Hwang-DBS. This company did another independent advice for the same offeror, more details can be found here:

http://cgmalaysia.blogspot.com/2011/09/muib-and-pmcorp-horrible-deal-from-past.html

In my opinion, both that Related Party Transaction between PMCorp and MUI and the independent report were the worst in Malaysia in the last 10 years, and that says a lot. Hwang-DBS is never punished in any way, shape or form (the authorities are aware about the horrific details of this deal but apparently are unwilling to take any action, for reasons only they know best). But to allow this same company to do another independent advice for the same major shareholder is pretty unbelievable.

[4] There is no mentioning at all in the document of the last Rights Issue by PMI and the projections done there. Interestingly, in that brochure PMI was projected to have losses in 2009, 2010 and 2011 (which is what happened), but to deliver profits from 2012 onwards. Why would shareholders accept a low offer just when profits are projected to kick in? At the very least there should be an update on these projections.

[5] There is no detailed discussion about the assets of PMI, mainly a building, a piece of land and shares in MUI: is there a way to unlock value, can or will they be revalued, etc.

[6] What is interesting (and this is almost completely ignored in the report) is that PMI is trading above the offer price, the last closing price is RM 0.06, 33% above the offer price. Since February 8, 2012 all transactions have been higher than the offered price.

It must be noted that quite a few breaches of rules by PMI have occurred (together with many Corporate Governance issues), but that so far nobody received even as much as a reprimand.

Maybulk, Maxbiz, PMI, AirAsia

Maybulk's share price has risen fast in the last month, in high volume:

Bursa Malaysia issued a "Unusual Market Activity" (UMA) alert, on which Maybulk responded:

"We refer to Bursa Malaysia’s query today in respect of the recent interest in Maybulk shares and wish to announce that the Company is not aware of any reasons or any corporate exercise that may have contributed to the increase in share price and high trading volume of Maybulk shares."

What definitely has changed lately is that the relentless selling by EPF has finally stopped. Up to December 30th 2011 the EPF routinely sold 2 million shares a day at a price around RM 1.50. Many of these shares were bought at double the price in 2009. Hopefully somebody can explain the logic behind this trading.

I have written a lot about Maybulk in the past regarding the controversial Related Party Transaction that took place in 2008, buying POSH shares at a very high price (more than four times the Net Asset Value) in the midst of the global recession:

http://cgmalaysia.blogspot.com/search/label/Maybulk

I have withdrawn my complaint with the authorities (SC & BM) out of protest against the highly unsatisfactory and even unethical way they have handled it. The only thing they have done really well in this case was dragging their feet.

Even up to today, minority investors have not been informed properly about important issues regarding the Related Party Transactions, either the POSH acquisition in 2008 or the (relatively less important) purchase of a vessel in 2009. In its latest year report less than one page (out of 81 pages) is dedicated to POSH, while about half of Maybulks shareholders equity is invested in it.


Maxbiz announced it is expecting profit margins of between 5% and 15% from its fiber network connection project.

http://www.theedgemalaysia.com/business-news/200086-maxbiz-expects-5-to-15-profit-margin-from-fibre-network-connection-project.html

It also made some clarifications in an announcement to Bursa Malaysia about some other projects.

The share price has lately retreated, from a high of RM 0.195 to RM 0.11.

A previous write-up of this blog stated "It is hard to find a company with more red flags than Maxbiz". It would be an immense effort if Maxbix can even stay afloat.

http://cgmalaysia.blogspot.com/search/label/Maxbiz


Pan Malaysian Industries (PMI) is forced to comply with the following: "compensate entitled shareholders of PMI who had sold their PMI Shares between 9.00 a.m. on 24 August 2011 and 5.00 p.m. on 25 August 2011 (“Compensation Period”) for the differential amount between the offer price of RM0.045 per Offer Share and the price at which their PMI Shares were sold during the Compensation Period"

http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/06D37FCB8672B1BC4825799200390931?OpenDocument

Apparently there was a timing difference between the moment the General Offer was announced and the moment is should have been announced. Good for shareholders who sold their shares below RM 0.045 during those days, although it will be only a small amount of money, I think, and most of the shareholders will be selling their shares anyhow at huge losses. 

Frankly, this ruling by the SC should be the least worry to PMI. I think there are many, much more serious Corporate Governance issues at stake here:

http://cgmalaysia.blogspot.com/search/label/PMI


The Edge Malaysia reported that AirAsia's airfare issue with the Australian Consumer watchdog (ACCC) has been resolved.

http://www.theedgemalaysia.com/business-news/199990-airasias-airfare-issue-with-australia-consumer-watchdog-resolved.html

"The problem could have been due to an IT issue, and it has been corrected."

However, the website of the ACCC has not yet issued a statement that the issue has been resolved:

http://www.accc.gov.au/content/index.phtml/itemId/2332 

I hope that AirAsia will treat Malaysian consumers as if they were protected by a powerful consumer watchdog similar to the ACCC.

PMI: problem solved

PMI had to find an independent director, only one was not enough according to the rules. More can be found here about the issues involved:

http://cgmalaysia.blogspot.com/search/label/PMI

PMI might have had some problems finding one, because they were more than one month late finding one.

So what did PMI do? They just converted an non-independent director to an independent director, problem solved.

http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/86B90A2BCA5DD445482579220039F96A?OpenDocument

No explanation whatsoever: why was this director first non-independent, what changed that now she can be assigned to be independent?

I find that rather peculiar, to say the least. And it is not the first time for PMI:

http://www.mswg.org.my/project/mswg/media/2009/01/21/090954-916.PDF
The new independent director of PMI, Puan Farizon bt Dato’ Ibrahim, is a Director of Metrojaya, which is under MUI (who has a common majority shareholder with PMI), but once Metrojaya belonged to PMI. It was privatized in a rather poor way, the money offered per share was less than the cash per share. Later Metrojaya was sold by PMI to MUI. More about these controversial deals can be found with Ze Moola:

http://whereiszemoola.blogspot.com/search/label/Metro%20Jaya

No news further about the MGO of PMI. The announcement was made on August 26, 2011, they would follow up withing three weeks. That has long passed, does that mean the authorities are looking into the issues surrounding this MGO?

Somehow or the other I don't think that PMI is really trying to win the 2011 Corporate Governance award. Is it time for the authorities to interfere? Are the Minority Shareholders of PMI treated in a proper way?

Updates on Corporate Exercises

Sime Darby / Eastern & Oriental: no news yet regarding a possible Mandatory General Offer (MGO) by Sime Darby or the investigation regarding possible insider trading. On one side we want a fast decision regarding the MGO, every day that goes by people trade the shares of the two companies with incomplete information. On the other side, we do want a good and proper decision, hopefully with an detailed and clear explanation to which future cases can refer back to. Sime Darby's share price suddenly plunged on the possibility of having to make a MGO. But E&O's shareprice is very much below the possible MGO price. The two contradict each other, it will be an interesting case to follow.

Pan Malaysian Industries Berhad (PMI): No news, the majority shareholder is buying some shares of PMI at the market for RM 0.045. The announcement of the unconditional take-over offer was made on August 26 2011, the offer document would be posted within 21 days, that has passed already. PMI also still needs to appoint at least one more independent director (there is only one at the moment), I think they are too late with that as well.

Eastern Pacific Industrial Corporation Berhad (EPIC): the offer document relating to the unconditional take-over offer for RM 3.10 per share and the compensation document for the cash compensation have been posted on September 14, 2011. Alliance Investment Bank will be independent adviser.

DXN Holdings Bhd: conditional take-over offer for RM 1.75 per share. OSK Investment Bank will be the independent adviser (announcement September 8, 2011).

DXN and EPIC are both very decent companies and it would be a pitty if they would be delisted. I am afraid that the chance of both being delisted is quite high though. Instead of trying to persuade foreign (especcially Chinese) companies to list in Bursa Malaysia, I think it would be more worthwhile to investigate why these very decent, medium sized companies are going for delisting. The overall quality of the 1000+ listed companies is already not that great, hundreds and hundreds of listed Malaysian companies have a long term Return On Equity (ROE) below the yield on a Fixed Deposit.

Khoo to consolidate interests in MUI via PMI privatisation

From The Edge, Sep 8, 2011:

The proposed privatisation of Pan Malaysian Industries Bhd (PMI) could help Tan Sri Khoo Kay Peng to consolidate his interests in Malayan United Industries Bhd (MUI). PMI holds a 10.27% stake in MUI.

PMI first announced to Bursa Malaysia on Aug 26 that it had received a takeover offer from a consortium of three companies to acquire the remaining 558 million shares or 44.17% stake they do not own in PMI at an offer price of 4.5 sen per share.

The consortium comprises Soo Lay Holdings Sdn Bhd with 8.6% equity interest, Hong Kong-based Norcoss Ltd (27.48%) and Cherubim Investment (HK) Ltd (CIL-19.69%) in PMI. Khoo is the controlling shareholder of all three companies.

PMI said the joint offerors plan to delist PMI if it is unable to comply with the shareholding spread requirement. The takeover offer needs the approval of the Securities Commission and Bursa Malaysia.

Following the announcement, CIL increased its stake further in PMI by 0.8%, purchasing a total of 7.65 million shares on Aug 29, Sept 2 and Sept 5.

Still, an analyst said the offer price of 4.5 sen is low compared with the standard 30% premium for takeover exercises in the past. PMI was trading at 4.5 sen when the offer was made on Aug 26. Since then, PMI has fallen as low as 3.5 sen before closing at 4.5 sen yesterday.

“It is also important to note that the counter has risen as high as seven sen early this year,” said the analyst, adding that the deal could be foiled as investors could hold onto the shares and force the consortium to offer a higher price.

The proposed privatisation of PMI is seen as a move by Khoo to gain a bigger controlling stake in MUI, in which PMI holds a 10.27% stake. Should the privatisation succeed, Khoo would increase his indirect shareholding in MUI from 49.93% currently to 55.23%.

“Apart from that, there is little reason for Khoo to take PMI private. PMI has been a loss-making company for many years and it does not have many assets besides Menara PMI,” he said.

PMI has been making losses since FY06. For FY11 ended March 31, it posted a net loss of RM300,000 on the back of RM4.7 million in revenue. As at June 30, it had RM131.52 million in borrowings while cash stood at only RM608,000. Its net assets stood at RM179.35 million or 2.12 sen per share.

At 4.5 sen per share, Khoo would need to pay approximately RM25.1 million to obtain the remaining shares of PMI. That is a small price to pay to consolidate his interests in MUI, where most of his assets are placed.

MUI has businesses in retailing, hotel, food and confectionery, financial investments and travel services. It owns retailers Metrojaya Bhd and Laura Ashley Holdings plc, which is listed on the London Stock Exchange.

MUI posted RM811,000 in net profit for 1HFY11 ended June 30 on the back of RM443.26 million in revenue, while net assets per share stood at 32.68 sen.


Valuation is one aspect of this deal, control of MUI another. I think there is more to this deal than mentioned in the above article. Let's see how this deal will work out, and what the Authorities will do about it.


http://cgmalaysia.blogspot.com/2011/09/pmi-serious-corporate-governance-issues.html

MUIB and PMCorp: a horrible deal from the past

"Ze Moola" attended me on a old corporate exercise from the MUIB stable. The "independent" report can be found here:

http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/afd99bbf47849e5848256f2b001970f4/$FILE/PMCorp-Circular.pdf

In short, Malayan United Industries Bhd. (MUIB) had borrowed RM 1,067,000,000 from related party Pan Malaysia Corporation (PMCorp), if would not or could not pay the amount back, a horrible and highly unsatisfactory situation for PMCorp shareholders.

The only thing MUIB could do is hive of some assets to PMCorp, but it decided to give the PMCorp shareholders shares in MUIB. Problem was that MUIB's shares were trading at only RM 0.185, that would mean that PMCorp were entitled to about 6 billion MUIB shares. Aparantly that was not what the Majority Shareholders of MUIB had in mind, therefore an ingenious scheme was designed. A pretty complicated one so that most Minority Investors would not be able to see through it. Instead of shares it would give ICULS, Irredeemable Convertible Unsecured Loan Stocks. These are Irredeemable, in other words they can not be redeemed for cash, you can (or will, there is no choice) somewhere in the future convert them 1:1 for MUI shares. They don't pay dividend like shares but interest, but even this would be paid in even more ICULS. This looks already bad for PMCorp shareholders, instead of cold hard cash they would get shares in a company that had been making huge losses over the last years. But what is simply amazing is the small number of ICULS they would receive, instead of the about 6 billion one would expect (RM 1,067 million divided by RM 0.185 = 5.8 Billion), they received less that 1.3 Billion ICULS. Minority Shareholders of PMCorp were thus hugely short changed, for more than RM 800 million.

The "independent" report from Hwang-DBS Securities Bhd. was of extremely low quality, I won't bother writing what was wrong with it (about everything), will just give their conclusion:

Let's check their arguments:

(i) The par value of MUIB shares: the par value has nothing to do with valuation. The fact that the NAV of a MUIB shares is way below the par value means it has accumulated huge losses, which is an indication of a badly managed company. By even suggesting the par value HWANG-DBS is simply deceiving Minority Investors.

(ii) The ICULS can only be converted to shares in the future: that is a disadvantage, not an advantage.

(iii) The future prospects of the MUIB group: the report was dated 12 Oct 2004, MUIB was thoroughly mismanaged, had lost Billions of RM, why would that suddenly improve? The results since then:

2004: RM -405 million
2005: RM -371 million
2006: RM -210 million
2007: RM +10 million
2008: RM -74 million
2009: RM +3 million
2010: RM +36 million

In total: losses of more than RM 1 Billion.

And what happened with the proposal and the circular? It was (as usual) approved by the authorities (Bursa Malaysia and/or Securities Commission), and neither the directors of PMCorp, MUIB or the "independent" advisor Hwang/DBS were ever punished in any way, shape or form.

Needless to say, the quality of the "independent" advice circulars in Malaysia has further gone down, 99% of them shamelessly support the Majority Shareholders, no matter how bad the deal is for the Minority Shareholders: "Whose bread I eat, his song I sing". And up to this very day, the authorities have not bothered to come down on the advisers.

Recommendation: Do away with the "independent" advice, it is hurting Minority Shareholder, not helping them.

MUIIND is currently trading at RM 0.21, the MUI ICULS are all trading at RM 0.17, PMCORP is at RM 0.09, PMIND at for RM 0.045 and PMCAP at for 0.085.

The renumeration for MUIB's Chairman and Chief Executive, Tan Sri Dato' Khoo Kay Peng, is more than RM 3.2 million a year.

PMI, serious Corporate Governance Issues

PMI (Pan Malaysian Industries Bhd) today issued its notice to shareholders:

http://announcements.bursamalaysia.com/EDMS/subweb.nsf/all/5BA3E1652E0A2ECF482578FF002E0B56/$File/PMI-%20Notice%20to%20Shareholders.pdf

I have blogged about PMI and its General Offer with delisting threat before:

http://cgmalaysia.blogspot.com/2011/08/pmi-sad-story-for-minority-shareholders.html

Ze Moolah blogged three times about PMI:

http://whereiszemoola.blogspot.com/search/label/PMI

In the most recent one, http://whereiszemoola.blogspot.com/2011/08/and-pmi-minorities-are-rewarded-so.html, he detailed how badly Minority Investors would have done if they had bought shares in 1993 due to all the rights issues and the falling shareprice due to the horrible financial results.

According to the latest year report there are only four directors in PMI at the moment, all non-executives. The only independent director in PMI is Ooi Boon Leong, 74 years old. However, I would doubt his independency since he has been with PMI for 20 years. He is also the Chairman of Pan Malaysia Holding Bhd. which is 69% deemed controlled by PMI. He was ousted as an director from Chemical Company of Malaysia Bhd. (CCM), a company partly controlled by MUI (again linked to PMI), most likely through the vote of Permodalan Nasional Bhd. (PNB). In the following article, Ooi is called a “Malayan United Industries Bhd (MUI) Group-linked directors”.

http://www.asiaviews.org/index.php?option=com_content&view=article&id=3219:headlinealias3219&catid=1:headlines&Itemid=2

“Another tussle is brewing at Chemical Company of Malaysia Bhd (CCM). In its recent annual general meeting (AGM), both Malayan United Industries Bhd (MUI) Group-linked directors, Khet Kok Yin and Ooi Boon Leong @ Law Weng Leun, failed in their bid for a re-election. They were among five directors seeking re-election, but the other three, Datuk Tan Kay Hock, Datuk Mohd Hussaini Abdul Jamil and E Sreesanthan all passed their bid.

Instead of a simple show of hands, both Khet and Ooi’s re-election went through the ballot poll. Interestingly, the poll was called by CCM’s largest shareholder, Permodalan Nasional Bhd (PNB). For the record, PNB has a 27.63% stake at CCM, while MUI’s Pan Malaysia Industries Bhd is CCM’s second largest shareholder with a 26.94% stake. During the AGM, some 58% of shareholders representing some 294 million or 80.4% of total shareholders voted against these directors. At time of writing, it is still unclear why PNB called for the poll and why both MUI-group linked directors did not get enough support. Perhaps, this tussle is still too soon to call, expect more CCM events to dominate the headlines in the coming weeks.”

Unfortunately, as usual, we do not know the reasoning off PNB, which has always been much too secretive about its motives, similar to the other large institutional investors in Malaysia.

EPF has issued its Corporate Governance Principles and Voting Guidelines:

http://www.kwsp.gov.my/index.php?hdl=bin&rp=976

PMI doesn't seem to pass the Corporate Governance guidelines from EPF:

• A minimum of 7 directors (PMI only has 4) for each listed company
• A balance between executive and non-executive directors: there are only non-executive directors
• A succession plan for directors exceeding 70 years old: PMI doesn’t seem to comply with directors of 72, 74 and 77 years old
• Independent director’s term should be limited to 12 years: Ooi Boon Leong is already 20 years a director of PMI

On 8 March 2006 PMI had become an affected listed issuer pursuant to PN17. A restructure followed including a rights issue. That issue was not received very well by Minority Shareholders, the total acceptance was only 31.2%, most likely all by the Majority Shareholder who also took care of the excess applications.

The prospectus can be found here:

http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/3b9b5800077b48694825752700270f93/$FILE/PMIND-Page%2071%20to%20Page%20140%20(2.1MB).pdf

PMI had to make a forecast for the earnings and projected losses (page 86 & 87) in 2009, 2010 and 2011, which is what indeed happened. But interestingly enough, it projected profits from 2012 onwards due to:

• Rental renewals at higher prices
• Development profit from the project on the acquired land
• Increase in price of MUI shares
• Reduced interest expenses

If this projection is still valid, would it not be strange to delist the company exactly when it starts to turn around?

Probably the strangest of the whole exercise is why two large shareholders sold their shares, both exactly at Aug 25^th 2011, for the paltry amount of RM 0.045, about the lowest price ever in the history of PMI. The shareholders (both companies are registered at the same address: 10th Floor, Menara Hap Seng, No. 1 & 3, Jalan P. Ramlee, 50250 Kuala Lumpur) are:

• Hope Foundation, 241 million shares
• Permata Bistari Sdn Bhd, 160 million shares

Even in 2011 the share has traded often between RM 0.055 and 0.070 cent (22% to 55% higher than the offer price), and just a few years ago in 2008 it traded at much higher prices, between RM 0.20 and RM 0.40.

It should be noted that the maximum price that was paid to Hope Foundation and Permata Bistari Sdn Bhd is the price that is offered to the Minority Investors, so its is very relevant for the General Offer. Interestingly, both companies have also invested in the past in Pan Malaysian Capital Bhd.

What can Minority Shareholders do?

They can file a complaint with the Securites Commission aduan@seccom.com.my, preferable with a copy to the Minority Shareholder Watchdog Group: watchdog@mswg.org.my

I will email both organisations about the above issues, although I am not a shareholder of PMI.

Especcially relevant are the following issues:

(c) that fair and equal treatment of all shareholders, in particular, minority shareholders, in relation to the take-over offer, merger or compulsory acquisition would be achieved; and  

(d) in its response to, or making recommendations with respect to any take-over offer, merger or   compulsory acquisition, the directors of the offeree and acquirer shall act in good faith to observe the objects, and the manner in which they observe the objects, specified in this subsection,

Source: page 202, "Capital Markets and Services Act 2007"

PMI: a sad story for Minority Shareholders

The Star: http://biz.thestar.com.my/news/story.asp?file=/2011/8/27/business/9383051&sec=business

"Pan Malaysian Industries Bhd (PMI) yesterday told Bursa Malaysia that it had received an unconditional takeover offer from a consortium of three companies at a cash offer price of 4.5 sen for each offer share."

"If PMI could not comply with the shareholding spread requirement as a result of acceptances received under the takeover offer, the consortium said they would delist PMI."



The "infamous" GO (General Offer) with "delisting threat" against which Minority Investors hardly have any chance to fight unless they don't mind ending up with shares in an unlisted company (and even then their shares could be Mandatory Acquired). The price is only 4.5 sen, that sounds like a bloody shame, the share traded routinely higher than that, even in 2011:

This is one company that has been a nightmare for its Minority Investors:

In the past 10 years several right issues which equal to negative dividend payments (from the investors to the company, if people don't subscribe they get further diluted at a low price). It booked routinely losses but due to the tight control through its Majority Shareholder it could not change its management, hoping for a new team to restructure the company.

This company has been involved with the delisting of Metrojaya, another really bad case of Corporate Governance, as was pointed out by Ze Moola: http://whereiszemoola.blogspot.com/2006/11/muis-purchase-of-metrojaya_02.html

A sad state of affairs and as usual it is the Minority Shareholders who take the brunt.