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: 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?

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: 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.