BRDB offer: "not fair but reasonable"

From the website of The Star:

Independent adviser recommends acceptance of Bandar Raya Developments buyout

The independent adviser for Bandar Raya Developments Bhd (BRDB) has recommended that minority shareholders accept the RM2.90 per share general offer by the company's major shareholder, deeming the offer as “not fair but reasonable”.

Major shareholder and chairman, Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, who owns 18.47% of BRDB via his private vehicle Ambang Sehati Sdn Bhd, had earlier made an offer to acquire all the shares and warrants of BRDB at RM2.90 and RM1.80 respectively. Moiz has been BRDB chairman since February 2002

The independent adviser, namely AmInvestment Bank Bhd, said in a circular to shareholders that the offer price for the shares represented a 91 sen or 23.88% discount to the estimated revised net asset value of the shares. “In our view, this 23.88% discount renders the share offer price of RM2.90 to be not fair,” it said.

However, it has recommended that shareholders accept the offer as the offer is considered not detrimental to them since the shares and warrants have consistently been trading below the offer price for the past three years up to July 30, when the offer was made.

Furthermore, AmInvestment Bank said BRDB had not received any other offer for the company's shares or its assets and liabilities.

It said the share offer price represented a premium ranging from 39 sen to 53 sen per share over the five-day, one-month, three-month and six-month volume weighted average market price up to July 30 while the warrant offer price represented a 36 sen to 52 sen premium over the same periods.

It added that the share offer price's 39-sen premium based on the five-day volume weighted average market price “is within the range of successful precedent privatisation transactions in Malaysia of 2.46% to 37.50% since January 2011.”

AmInvestment Bank also reminded holders of the warrants that these securities would expire on Sept 26, after which they would have no value.

It said that based on the share offer price, the annual gross dividend yield for the shares for the past two years was about 2.59%.

Ambang Sehati had proposed the acquisition of The Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall early last September on a fair value basis. The properties had a total value of RM942.37mil.

But the offer to buy the properties at RM914mil fell through several weeks later after questions arose over the price, motives behind the acquisition, the identity of the ultimate shareholders behind a 23.57% block of shares held under a nominee account for Credit Suisse and the company's prospects after losing properties generating recurring income.

It was then decided that the properties would be sold via open tender by the first quarter of this year with Ambang Sehati participating but the tender for the properties was never carried out. This was followed by the general offer by Ambang Sehati to buy out the rest of the shares in BRDB for RM1.17bil cash.

BRDB closed unchanged at RM2.85.


Is the identity of the large block of shares already revealed? If not, why not, should there not be transparency regarding this important matter?

Interestingly, the major shareholder of BRDB was also the same party behind the settlement of the CLOB shares. And sentiment towards the way the CLOB issue was handled is pretty negative (to put it mildly) in Singapore, and might have to do with the luke warm start of the SGX-Bursa trading link. Below is a part of an article is from the Business Times (Singapore):


SGX-Bursa trading link off to a slow start

The trading link between the Singapore Exchange (SGX) and Bursa Malaysia (BM) went "live" yesterday but failed to excite investors - dealers here reported little or no interest among the clients who were said to be more concerned with Europe's debt worries and the US stagnant economy.

"Singapore investors could already trade Malaysian shares for years before this link and vice-versa while clients could also trade through the Internet," said a dealer. "Maybe when the other Asean exchanges come online, interest will pick up."


And from the Straits Times:

"As expected, the first day of the SGX-Bursa link did not have any visible impact on trading activity".

Blast from the Past: CLOB (2)

From The Straits Times, an article by Anita Gabriel:

Tycoon who made Clob investors a daring offer

Before 1999, few had heard of reclusive tycoon Akbar Khan, a Singaporean businessman based in Kuala Lumpur.

But not many could forget him once he emerged on the scene back then with a plan to free up frozen Clob shares.

Mr Khan and his nephew, Mr Mohamed Moiz Ali Moiz - another name etched in the memory of former Clob investors - have been making some big corporate moves in recent months.

Mr Khan's private vehicle Ambang Sehati - also owned by his two children and Mr Moiz - recently launched a RM 1.5 billion takeover offer for Bandaraya Development (BRDB), a listed flagship property firm in Malaysia where they are the majority shareholder.

BRDB is mostly involved in the high-end luxury residential market. Ambang Sehati acquired BRDB in 2001 following a restructuring of Multi-Purpose Holdings, which was a Clob darling that was popular with Singapore investors in the 1990's.

Mr Khan, a chartered accountant by training who is widely perceived to be close to Malaysia's former finance minister Daim Zainuddin, continues to keep a low profile.

In 1999, his Effective Capital - where Mr Moiz was chief executive - enraged Singaporeans when it first swooped in with a cash offer to buy all the Clob shares at half their last traded price.

(Note MAW: the last traded price was already very depressed, this all happened in the midst of the Asian crisis)

Matched by somewhat palatable offers made by other parties, he would tweak his offer several times later.

His final plan to migrate the shares back to their rightful shareholders on a staggered basis at a fee of 1.5 per cent eventually pulled through, reportedly netting the company Effective Capital a cool RM 80 million.

The fee was hard to swallow for the stricken investors who had suffered great losses.

BRDB, who is behind 33% of the shares?

From an article in The Edge of August 6, 2012, written by M. Shanmugam:

"As far back as November last year, the writing was on the wall that Ambang Sehati Sdn Bhd, the major shareholder of Bandar Raya Development Bhd (BRDB) would be forced to privatise the property developer.

A poorly orchestrated bid by the private company to carve out a clutch of prime properties held by BRDB for RM 914 million triggered protests from the minority shareholders and forced the directors of the publicly listed company to invite competing bids for the assets - the retail centre in Capital Square, Permas Jaya Mall and BR Property Holdings Sdn Bhd.

The prospect of an auction left Ambang Sehati with no choice but to launch a takeover of the company, financial executives say".

"Ambang Sehati has an 18.84% stake in BRDB and plays second fiddle to a group of investors whose shares are held by Credit Suisse in two blocks totalling 33.18%.

The ultimate owner of the 33.18% is not known....."


I left out on purpose the speculation who possibly owns this block. I don't think minority shareholders should have to guess who actually controls a company. Knowledge who owns and controls large amounts of shares is very important from a corporate governance point of view. It has far reaching implications for instance towards related party transactions, possible mandatory general offers, parties acting in concert, voting in AGM's and EGM's, etc.

The Malaysian authorities should force the holders of the large block of shares to reveal themselves. Their inaction in this matter is puzzling, to say the least.

Unique events for Bursa Malaysia?

Two former directors sentenced to jail and fined for CBT

http://www.sc.com.my/main.asp?pageid=379&linkid=2923&yearno=2011&mod=paper

"The Kuala Lumpur Sessions Court today found two former directors of Multicode Electronics Industries (M) Berhad, guilty of committing criminal breach of trust under section 409 of the Penal Code involving over RM26 million of funds belonging to the company.

Gordon Toh Chun Toh was sentenced to 12 years imprisonment while Dato' Abul Hassan bin Mohamed Rashid received a jail sentence of six years. Gordon Toh, a Singaporean, was also ordered to pay a fine of RM1 million, in default two years imprisonment."

Long prison sentences are the only real deterrent for would be offenders. However, there might be an appeal so we have to wait if the sentence will uphold.

Yesterday the independent advice regarding EPIC (Eastern Pacific Industrial Corporation Bhd) was send to the shareholders. The independent adviser Alliance Investment Bank found the offer "fair and reasonable" and advices shareholders to accept the offer. No surprise there, but to be honest, the advice was quite decent.

However, I was very pleasantly surprised by the following:

It is very, very rare for companies listed on the Bursa Malaysia that a director disagrees in public. His reasoning can be found here:

I actually completely agree with Mr. Wan Salleh, nothing to add. I take my hat off for him, as one of the rare directors to dare to speak out in public.

However, on another matter, I was not too pleased about the timetable of this offer:

Shareholders had already nine days the Offer Document with text like "no intention to retain the listing status", "mandatory acquisition", etc. They might be tempted therefore to accept already, not waiting for the independent advice that was send only yesterday. I would strongly suggest combining the two documents in one and sending them together to the shareholder.

BRDB asked to disclose stock owner?

http://biz.thestar.com.my/news/story.asp?file=/2011/9/24/business/9566181&sec=business

"Bandar Raya Development Bhd (BRDB) has been asked by Bursa Malaysia to clarify to its shareholders issues that have been raised in the media regarding the company's proposal to hive off key assets to its major shareholder, reliable sources said.

One of the most sticky issues related to the deal is the unknown identity behind an influential 23.6% block of shares in BRDB held under a nominee account for Credit Suisse.

The Minority Shareholder Watchdog Group (MSWG) had pointed out that this stake was very likely to be the deciding factor in whether the asset sale would go through. This is on the basis that the 23.6% block amounts to 30% of total disinterested shareholders of BRDB and in turn might comprise 50% of votes of shareholders who actually turn up to vote on the matter, which requires only a simple majority to go through."


BRDB "has been asked to clarify"? I definetely hope that some more harsh terms have been used, like "summoned". I am hoping for total transparancy here, both regarding the details of this mysterious shareholder(s), and his/her voting at the EGM.