I wrote before about the special auditor's report regarding certain irregularities in Tanjung Offshore.
The Star wrote today an article about the same matter: "Spotlight on Tanjung Offshore deals abroad".
One line from the article:
"..... the audit report sighted by StarBizWeek ...."
And then quite a few new revelations that were not included in the rather stingy announcements to Bursa. It is good that we now know a bit more about the report from Ferrier Hodgson MH Sdn Bhd, but can we please also read the full document? Surely minority investors and interested persons are entitled to know the contents, having been left in the dark for so long.
Some of those new revelations are:
On the China and Philippines venture, Ferrier Hodgson found that there was too much reliance on one Stephen Lee, who promoted both the deals to the company. Lee was born in Taiwan now a China national, according to the report. Similarly, Ferrier Hodgson finds that Tanjung Offshore did not follow proper corporate protocol for its RM6.2mil foray into a chromite mine project in the Philippines in 2013. Again Lee was the promoter of this project. “A trading play, the buying and selling of chromite was facilitated by Stephen Lee and his associates with Tanjung Offshore making the profit differentials,” findings of forensic audit states.
It would be interesting to know how this Stephen Lee is connected to Tanjung Offshore, because surely there has to be some connection there.
Based on a letter dated Feb 26, 2014 by Tanjung Offshore’s legal adviser in the UK and the company’s board paper presented to board members on Feb 27, 2014, the estimated development cost of the property was known to the management and board members of Tanjung Offshore, says the report. “Therefore, it should have been disclosed to Bursa, especially since Bursa had specifically questioned Tanjung Offshore on this matter after the company’s first announcement of the Birmingham purchase.” states the firm in the report.
Usually Bursa will not take it lightly, being wrongfully informed about a matter it specifically asked. We can therefore expect some enforcement from Bursa and/or Securities Commission regarding this (and possibly other) matters. Which persons inside Tanjung knew (or should have known) about this?
Showing posts with label Tanjung Offshore. Show all posts
Showing posts with label Tanjung Offshore. Show all posts
Saturday, 13 June 2015
Sunday, 7 June 2015
Tanjung Offshore: special auditor's report
Three announcements (here, here and here) by Tanjung Offshore regarding the report that was finalized by the special auditor, looking into several possible irregularities.
The first announcement writes that "....the Special Auditor is of the view that there does not appear to be any conflict of interest or related breach of duty with respect to Tan Sri Tan Kean Soon and Muhammad Sabri Ab Ghani.".
Although important news, that was a rather limited announcement, so the company followed up one week later with more detail:
First of all, good news for shareholders activism in Malaysia, because of the complaints by the minority shareholders the ball started rolling.
Six deals were being reviewed, unfortunately not the sale of their main business to Ekuinas, about which I wrote before.
The forensic report does not find any problem regarding the Bourbon deal, since anyhow the company "was legally not in a position to pursue due to the Non-Compete Clause" (which the company signed when it sold its business to Ekuinas.
That might very well be the case, but it is still rather strange, since the non-compete clause was all the time there, it didn't suddenly pop-up. It was also not mentioned in their announcement on June 5, 2014, which does not seem right, surely it should have been explicitly mentioned as condition precedent to the deal that the non complete clause had to be waived by Ekuinas for the deal to proceed.
The Gastec deal is under investigation with the MACC.
The UK property acquisition will be valued. There seems to be an issue with the refurbishment regarding non-performance.
The EPDM project does not appear to have followed the correct procedures.
Regarding the chromite mine, there are several breaches.
Lots of work to do, this is only a first stage of investigation, lawyers, Bursa, MACC and possible other agencies have their work cut our for them.
The first announcement writes that "....the Special Auditor is of the view that there does not appear to be any conflict of interest or related breach of duty with respect to Tan Sri Tan Kean Soon and Muhammad Sabri Ab Ghani.".
Although important news, that was a rather limited announcement, so the company followed up one week later with more detail:
First of all, good news for shareholders activism in Malaysia, because of the complaints by the minority shareholders the ball started rolling.
Six deals were being reviewed, unfortunately not the sale of their main business to Ekuinas, about which I wrote before.
The forensic report does not find any problem regarding the Bourbon deal, since anyhow the company "was legally not in a position to pursue due to the Non-Compete Clause" (which the company signed when it sold its business to Ekuinas.
That might very well be the case, but it is still rather strange, since the non-compete clause was all the time there, it didn't suddenly pop-up. It was also not mentioned in their announcement on June 5, 2014, which does not seem right, surely it should have been explicitly mentioned as condition precedent to the deal that the non complete clause had to be waived by Ekuinas for the deal to proceed.
The Gastec deal is under investigation with the MACC.
The UK property acquisition will be valued. There seems to be an issue with the refurbishment regarding non-performance.
The EPDM project does not appear to have followed the correct procedures.
Regarding the chromite mine, there are several breaches.
Lots of work to do, this is only a first stage of investigation, lawyers, Bursa, MACC and possible other agencies have their work cut our for them.
Thursday, 21 May 2015
MACC detains ex-director Tanjung Offshore
Tanjung Offshore continues to be in the news for the wrong reasons. According to The Star:
The Malaysian Anti-Corruption Commission (MACC) is investigating an ex-director of oil and gas (O&G) company Tanjung Offshore Bhd to assist into allegations of bribery in relation to a project.
According to a Bernama report, the investigations are believed to be linked to the purchase of Gas Generators (Malaysia) Sdn Bhd.
Sources said the individual, who is in his late 50s, had turned up at the MACC headquarters in Putrajaya yesterday afternoon and was detained for further questioning.
MACC would obtain a remand order today.
Tanjung will soon release it's 2014 year report, which includes a statement about Corporate Governance.
I predict the Board of Directors will write that CG in the company is in excellent state, and that the company adheres to the highest possible standards.
I leave it to the imagination of the reader if this statement will indeed be correct.
Asking companies about their Corporate Governance is much more useless than asking your hairdresser if you need a haircut. Bursa should do away with the requirement for this kind of statements, which simply begs for a boilerplate answer. Even the companies with the worst possible CG standards will still claim to have the best possible CG.
The Malaysian Anti-Corruption Commission (MACC) is investigating an ex-director of oil and gas (O&G) company Tanjung Offshore Bhd to assist into allegations of bribery in relation to a project.
According to a Bernama report, the investigations are believed to be linked to the purchase of Gas Generators (Malaysia) Sdn Bhd.
Sources said the individual, who is in his late 50s, had turned up at the MACC headquarters in Putrajaya yesterday afternoon and was detained for further questioning.
MACC would obtain a remand order today.
Tanjung will soon release it's 2014 year report, which includes a statement about Corporate Governance.
I predict the Board of Directors will write that CG in the company is in excellent state, and that the company adheres to the highest possible standards.
I leave it to the imagination of the reader if this statement will indeed be correct.
Asking companies about their Corporate Governance is much more useless than asking your hairdresser if you need a haircut. Bursa should do away with the requirement for this kind of statements, which simply begs for a boilerplate answer. Even the companies with the worst possible CG standards will still claim to have the best possible CG.
Tuesday, 24 March 2015
Tanjung Offshore: more twists and turns
Tanjung Offshore's storyline seems to have more twists and turns than a whole season of Game of Thrones.
Even Transparency International Malaysia (TI-M) entered the fray, according to this news article.
Although Tanjung Offshore is a very interesting case to follow from a corporate governance point of view, TI-M might just want to focus on the big ticket items like 1MDB, which might be literally one thousand times bigger than Tanjung Offshore: the issues in the former company seems to run in the billions, the issues in the latter company in the millions.
Yesterday Tanjung Offshore made fourteen announcements in one go:
The Malaysian Insider wrote about the issues, some snippets:
According to a filing with Bursa Malaysia today, the withdrawal notice from the three parties – Tan Sri Tan Kean Soon, Datuk Dr Nik Norzrul Thani N. Hassan Thani and Datin Norhafizah Mohd Nordin – was received after the uplifting of suspension of three officers – Tan, Muhammad Sabri Ab Ghani and Harzani Azmi with immediate effect.
Interestingly, the board of directors has also redesignated Tan as its new executive director, replacing Muhammad Sabri who has resigned from the board today. Tan was previously a non-executive director.
Apart from Muhammad Sabri, who resigned for "personal reasons", George William Warren Jr has also resigned as independent non-executive director “to explore other opportunities elsewhere".
In a press statement, Tanjung said the board welcomed Datuk Mohd Hafarizam Harun as its chairman, after appointing him an independent non-executive director today. Three others were also appointed as independent non-executive directors, namely Nik Norzrul Thani, Datuk Maheran Mohd Salleh and Tan Sam Eng.
Meanwhile the Audit Committee, in consultation with Bursa, had on March 20, 2015, appointed Ferrier Hodgson MH Sdn Bhd as a special auditor to review matters highlighted by the Independent Committee (IC).
To recap, Tan had initially planned to remove Warren and two other directors – Datuk Ab Wahab Ibrahim (non-executive director) and Shahrizal Hisham Abdul Halim (independent non-executive director) – in the proposed EGM. Warren, Wahab Ibrahim and Shahrizal Hisham were the members in an IC established by Tanjung’s board of directors on Jan 8 this year.
The reasons given for the resignations ("To explore other opportunities else where." and "Personal reason.") are disappointing given what happened in the past, I had expected some more zest.
I guess that we have to wait for the outcome of the investigations by the special auditor and by the authorities.
Even Transparency International Malaysia (TI-M) entered the fray, according to this news article.
Although Tanjung Offshore is a very interesting case to follow from a corporate governance point of view, TI-M might just want to focus on the big ticket items like 1MDB, which might be literally one thousand times bigger than Tanjung Offshore: the issues in the former company seems to run in the billions, the issues in the latter company in the millions.
Yesterday Tanjung Offshore made fourteen announcements in one go:
The Malaysian Insider wrote about the issues, some snippets:
According to a filing with Bursa Malaysia today, the withdrawal notice from the three parties – Tan Sri Tan Kean Soon, Datuk Dr Nik Norzrul Thani N. Hassan Thani and Datin Norhafizah Mohd Nordin – was received after the uplifting of suspension of three officers – Tan, Muhammad Sabri Ab Ghani and Harzani Azmi with immediate effect.
Interestingly, the board of directors has also redesignated Tan as its new executive director, replacing Muhammad Sabri who has resigned from the board today. Tan was previously a non-executive director.
Apart from Muhammad Sabri, who resigned for "personal reasons", George William Warren Jr has also resigned as independent non-executive director “to explore other opportunities elsewhere".
In a press statement, Tanjung said the board welcomed Datuk Mohd Hafarizam Harun as its chairman, after appointing him an independent non-executive director today. Three others were also appointed as independent non-executive directors, namely Nik Norzrul Thani, Datuk Maheran Mohd Salleh and Tan Sam Eng.
Meanwhile the Audit Committee, in consultation with Bursa, had on March 20, 2015, appointed Ferrier Hodgson MH Sdn Bhd as a special auditor to review matters highlighted by the Independent Committee (IC).
To recap, Tan had initially planned to remove Warren and two other directors – Datuk Ab Wahab Ibrahim (non-executive director) and Shahrizal Hisham Abdul Halim (independent non-executive director) – in the proposed EGM. Warren, Wahab Ibrahim and Shahrizal Hisham were the members in an IC established by Tanjung’s board of directors on Jan 8 this year.
The reasons given for the resignations ("To explore other opportunities else where." and "Personal reason.") are disappointing given what happened in the past, I had expected some more zest.
I guess that we have to wait for the outcome of the investigations by the special auditor and by the authorities.
Friday, 13 March 2015
Tanjung Offshore filing a 100M lawsuit
I posted a few times about Tanjung Offshore. It seems the saga is continuing, according to this article in The Star: "Tanjung Offshore sues director and 6 others for RM100m".
A snippet:
Tanjung Offshore Bhd is suing its director Tan Sri Tan Kean Soon and six others for alleged defamation arising from remarks he made in articles published in the media on Feb 9.
The company said it was seeking damages of RM100mil.
The suit was filed on Feb 24, 2015 and it served on the seven defendants’ respective solicitors on Thursday. The defendants are Datuk Dr Nik Norzrul Thani N. Hassan Thani, Datin Norhafizah Mohd Nordin, Datuk Rosman Hassan, Datuk Norazman Hamidun and Datuk Maheran Mohd Salleh and Tan Sam Eng.
The suit was filed by Tanjung and its three independent non-executive directors, George William Warren Jr, Datuk Ab Wahab Ibrahim and Shahrizal Hisham Abdul Halim.
Remarkable is that this is all done by independent (in other words not owning a big chunk of the shares) non-executive (not involved in the daily running of the company) directors. In Malaysia these kind of directors are normally not known for this kind of actions, in the contrary.
I am sure that the authorities are looking into this case, they have their work cut out for them.
A snippet:
Tanjung Offshore Bhd is suing its director Tan Sri Tan Kean Soon and six others for alleged defamation arising from remarks he made in articles published in the media on Feb 9.
The company said it was seeking damages of RM100mil.
The suit was filed on Feb 24, 2015 and it served on the seven defendants’ respective solicitors on Thursday. The defendants are Datuk Dr Nik Norzrul Thani N. Hassan Thani, Datin Norhafizah Mohd Nordin, Datuk Rosman Hassan, Datuk Norazman Hamidun and Datuk Maheran Mohd Salleh and Tan Sam Eng.
The suit was filed by Tanjung and its three independent non-executive directors, George William Warren Jr, Datuk Ab Wahab Ibrahim and Shahrizal Hisham Abdul Halim.
Remarkable is that this is all done by independent (in other words not owning a big chunk of the shares) non-executive (not involved in the daily running of the company) directors. In Malaysia these kind of directors are normally not known for this kind of actions, in the contrary.
I am sure that the authorities are looking into this case, they have their work cut out for them.
Wednesday, 11 February 2015
Announcements: Tanjung, Dufu, Sasbadi, China Stationary
Tanjung Offshore announced:
"We refer to our previous announcements on 8 January 2015, 5 February 2015 and 6 February 2015. Tanjung Offshore Berhad (“Tanjung” or “Company”) wishes to announce that it has on 11 February 2015, lodged a Police Report against two directors, Tan Sri Tan Kean Soon (“Tan”) and Muhammad Sabri bin Ab Ghani who have been suspended from their executive positions following the findings of the Company’s Independent Committee.
We also refer to the following articles: “Tan Kean Soon breaks silence over allegations at Tg Offshore”, published by Bernama on February 9, 2015; and “Tan Kean Soon declares he is blameless over Tanjung Offshore issue”.
In reference to Tan’s allegations in these articles, the Company would like to state that Tan was given ample opportunity to present his concerns before the Independent Committee. However, Tan declined to attend interviews with the Independent Committee, or to make any statement to the Committee despite several reminders to attend the interviews. When the Board of Directors (“Board”) of Tanjung formed the Independent Committee at the meeting of 8 January 2015, Tan had agreed to and consented to it. The Board also agreed to his request to include Tan's personal legal advisor as an ex officio member of the Independent Committee. Tan’s personal legal adviser attended only the initial two (2) meetings out of daily meetings conducted by the Independent Committee over a two (2) week period."
This in relation to statements like "I am certainly blameless", as made by Tan in an article in The Star. Time will tell if that is correct.
Dufu announced:
The Board of Directors of DUFU (“the Board”) wishes to announce that it had on February 4, 2015 received an allegation letter against certain Senior Management of the Group on misappropriation of the Company’s fund of approximately RM3.9 million. Further to the emergency Board of Directors’ Meeting held on February 9, 2015 to address such allegation, the Board still unable to ascertain the factuality of such allegation for the time being. In consequent thereto, the Board has set up an Independent Committee (IC), comprising 3 Independent Directors of DUFU to coordinate and oversee the investigation process of the case. The composition of the IC are as follows:-
Chairman: Mr. Ong Choon Heng;
Members: Mr. Khoo Lay Tatt and Mr. Ang Siak Keng.
KiniBiz wrote about Sasbadi, a company that only listed half a year ago:
"Law En Ruey, the chief operating officer of recently listed book publisher Sasbadi Holdings Bhd, has moved to retire from his post at the ripe old age of 30, according to an announcement on Bursa Malaysia."
When one invest in a stock one bets on the horse (read: company), but also the jockey (read: the management team). An important change has occurred so soon after a listing, which is rather remarkable.
China Stationary announced its 4th quarter results, a selection of some red flags:
Next to that, losses due to the fire, late delivery and 10% deviation in reported earnings:
The cash flow statement is also puzzling, despite the losses and spending on PPE the cash as measured in RM went actually up because of RM 455M due to the exchange rate? The Chinese Renminbi did indeed change somewhat relative to the Ringgit, but not that much.
"We refer to our previous announcements on 8 January 2015, 5 February 2015 and 6 February 2015. Tanjung Offshore Berhad (“Tanjung” or “Company”) wishes to announce that it has on 11 February 2015, lodged a Police Report against two directors, Tan Sri Tan Kean Soon (“Tan”) and Muhammad Sabri bin Ab Ghani who have been suspended from their executive positions following the findings of the Company’s Independent Committee.
We also refer to the following articles: “Tan Kean Soon breaks silence over allegations at Tg Offshore”, published by Bernama on February 9, 2015; and “Tan Kean Soon declares he is blameless over Tanjung Offshore issue”.
In reference to Tan’s allegations in these articles, the Company would like to state that Tan was given ample opportunity to present his concerns before the Independent Committee. However, Tan declined to attend interviews with the Independent Committee, or to make any statement to the Committee despite several reminders to attend the interviews. When the Board of Directors (“Board”) of Tanjung formed the Independent Committee at the meeting of 8 January 2015, Tan had agreed to and consented to it. The Board also agreed to his request to include Tan's personal legal advisor as an ex officio member of the Independent Committee. Tan’s personal legal adviser attended only the initial two (2) meetings out of daily meetings conducted by the Independent Committee over a two (2) week period."
This in relation to statements like "I am certainly blameless", as made by Tan in an article in The Star. Time will tell if that is correct.
Dufu announced:
The Board of Directors of DUFU (“the Board”) wishes to announce that it had on February 4, 2015 received an allegation letter against certain Senior Management of the Group on misappropriation of the Company’s fund of approximately RM3.9 million. Further to the emergency Board of Directors’ Meeting held on February 9, 2015 to address such allegation, the Board still unable to ascertain the factuality of such allegation for the time being. In consequent thereto, the Board has set up an Independent Committee (IC), comprising 3 Independent Directors of DUFU to coordinate and oversee the investigation process of the case. The composition of the IC are as follows:-
Chairman: Mr. Ong Choon Heng;
Members: Mr. Khoo Lay Tatt and Mr. Ang Siak Keng.
The IC has been authorized to perform the following duties at its sole discretion:-
- To appoint an Investigation Auditors to investigate on the remittance of fund to U.S. during the year of 2013;
- To request the existing Auditors of the Group (Messrs. Crowe Horwath) to investigate on the remittance of fund to U.S. during the year of 2014;
- To investigate on the potential related party transactions.
KiniBiz wrote about Sasbadi, a company that only listed half a year ago:
"Law En Ruey, the chief operating officer of recently listed book publisher Sasbadi Holdings Bhd, has moved to retire from his post at the ripe old age of 30, according to an announcement on Bursa Malaysia."
When one invest in a stock one bets on the horse (read: company), but also the jockey (read: the management team). An important change has occurred so soon after a listing, which is rather remarkable.
China Stationary announced its 4th quarter results, a selection of some red flags:
- Revenue has fallen hugely this quarter to only RM 36M
- But PPE (Property, Plant & Equipment) is strangely up a lot, about RM 80M
- However, depreciation is down
- Loss over the year before tax is RM 216M
- Trade & Other Receivables is up to RM 200M, strange in relation to the low revenue
- Selling and Distribution expenses fallen from RM 34M to only RM 1M
- Cash is down almost RM 300M
- But interest received is hugely up, from RM 4M to RM 29M
Next to that, losses due to the fire, late delivery and 10% deviation in reported earnings:
The cash flow statement is also puzzling, despite the losses and spending on PPE the cash as measured in RM went actually up because of RM 455M due to the exchange rate? The Chinese Renminbi did indeed change somewhat relative to the Ringgit, but not that much.
Tuesday, 10 February 2015
Tanjung Offshore: possible misconduct (2)
There has been a few new developments in this case. Tanjung Offshore has submitted the reports (containing the findings of the independent commission) both to the Securities Commission and to Bursa Malaysia. We need to wait what their actions will be, if any.
According to recent newspaper articles (like this one in The Star) Tan Sri Tan Kean Soon "has broken his silence over certain allegations at Tanjung Offshore Bhd. In refuting what has appeared in the media in the last fortnight, Tan said he would soon tell his side of the story so that shareholders would know the full picture."
That is rather vague, and we have to wait for more details. The only "meat" in the article is this part:
"Tan said he had questioned a number of deals that were announced and then aborted, especially those which incurred hefty and wasteful advisory fees without bringing any benefit to the company. He was also not pleased at the questionable manner in which the company acquired an oil and gas service provider as well as the acquisition of a residential property abroad which was not aligned to the core businesses of Tanjung Offshore."
I find the property acquisition by an Oil&Gas player also rather odd, but the question is did Tan openly speak out against the property deal and the high advisory fees? In the announcements made to Bursa I can't find indication whatsoever that the board of directors did not agree on these matters. If Tan opposed these deals, surely he should have made his opinion and reasoning known to the other shareholders?
According to recent newspaper articles (like this one in The Star) Tan Sri Tan Kean Soon "has broken his silence over certain allegations at Tanjung Offshore Bhd. In refuting what has appeared in the media in the last fortnight, Tan said he would soon tell his side of the story so that shareholders would know the full picture."
That is rather vague, and we have to wait for more details. The only "meat" in the article is this part:
"Tan said he had questioned a number of deals that were announced and then aborted, especially those which incurred hefty and wasteful advisory fees without bringing any benefit to the company. He was also not pleased at the questionable manner in which the company acquired an oil and gas service provider as well as the acquisition of a residential property abroad which was not aligned to the core businesses of Tanjung Offshore."
I find the property acquisition by an Oil&Gas player also rather odd, but the question is did Tan openly speak out against the property deal and the high advisory fees? In the announcements made to Bursa I can't find indication whatsoever that the board of directors did not agree on these matters. If Tan opposed these deals, surely he should have made his opinion and reasoning known to the other shareholders?
Friday, 30 January 2015
Tanjung Offshore: possible misconduct
I wrote several times about Tanjung Offshore: here, here and here.
The Independent committee announced its findings.
The Maritime Executive wrote the following commentary:
Malaysia’s Tanjung Offshore has suspended three top executives after an internal inquiry into possible misconduct.
The company released a statement saying the suspensions were made on the recommendation of an independent committee.
Tan Sri Tan Kean Soon and Muhammad Sabri bin Ab Ghani have been suspended from their executive roles with immediate effect, but remain as directors of the company. Non-Independent Director Tan is a paid advisor of Tanjung, while Sabri is Executive Director.
Dato Harzani bin Azmi’s services as a paid advisor to the company have also been suspended with immediate effect. His earlier nomination to the board of directors shall not be considered, the company said in a statement.
Tanjung will hold further investigations into the findings of the independent committee which included several instances of possible conflict of interest and breach of fiduciary duty by Tan and Sabri, both individually and together, and possible breaches of procedure and limits of authority by Harzani among other matters.
The independent committee was formed on January 8, 2015 by the board to conduct an internal review following speculative media articles and purported complaints to the authorities against the company.
The possible conflicts of interest and breaches of fiduciary duty may have resulted in, among others, loss of business opportunity and potential income stream related to the Bourbon deal. A proposed asset injection by Bourbon Offshore Asia Pacific was mutually terminated in December 2014, following changes in the prevailing economic, financial and market conditions including declining oil prices.
The possible conflicts and breaches may also have resulted in disadvantageous and lopsided terms for a contract under negotiation, and potential future loss related to a Construction Work Request (CWR) project worth about RM250 million ($69 million).
These possible conflicts and breaches also may have been the cause for the dissemination of confidential company information to third parties related to both the Bourbon deal and the CWR project. These could also be potentially jeopardizing the company’s relationship with CNPC Offshore Engineering (CPOE) in China in on-going negotiations for a drilling contract in Malaysia.
The board will seek legal advice on its next course of action, and will make the appropriate reports to the authorities wherever necessary, said Tanjung.
It must be noted that in the official announcement of the company the link between the three suspended directors and the alleged misconduct is not made, most likely because of legal issues (everyone is presumed innocent until proven guilty).
We can safely assume that the authorities (SC and/or BM) are also on this case, possible conflict of interest (without announcing it) and breach of fiduciary duties of directors are quite severe.
The Independent committee announced its findings.
The Maritime Executive wrote the following commentary:
Malaysia’s Tanjung Offshore has suspended three top executives after an internal inquiry into possible misconduct.
The company released a statement saying the suspensions were made on the recommendation of an independent committee.
Tan Sri Tan Kean Soon and Muhammad Sabri bin Ab Ghani have been suspended from their executive roles with immediate effect, but remain as directors of the company. Non-Independent Director Tan is a paid advisor of Tanjung, while Sabri is Executive Director.
Dato Harzani bin Azmi’s services as a paid advisor to the company have also been suspended with immediate effect. His earlier nomination to the board of directors shall not be considered, the company said in a statement.
Tanjung will hold further investigations into the findings of the independent committee which included several instances of possible conflict of interest and breach of fiduciary duty by Tan and Sabri, both individually and together, and possible breaches of procedure and limits of authority by Harzani among other matters.
The independent committee was formed on January 8, 2015 by the board to conduct an internal review following speculative media articles and purported complaints to the authorities against the company.
The possible conflicts of interest and breaches of fiduciary duty may have resulted in, among others, loss of business opportunity and potential income stream related to the Bourbon deal. A proposed asset injection by Bourbon Offshore Asia Pacific was mutually terminated in December 2014, following changes in the prevailing economic, financial and market conditions including declining oil prices.
The possible conflicts and breaches may also have resulted in disadvantageous and lopsided terms for a contract under negotiation, and potential future loss related to a Construction Work Request (CWR) project worth about RM250 million ($69 million).
These possible conflicts and breaches also may have been the cause for the dissemination of confidential company information to third parties related to both the Bourbon deal and the CWR project. These could also be potentially jeopardizing the company’s relationship with CNPC Offshore Engineering (CPOE) in China in on-going negotiations for a drilling contract in Malaysia.
The board will seek legal advice on its next course of action, and will make the appropriate reports to the authorities wherever necessary, said Tanjung.
It must be noted that in the official announcement of the company the link between the three suspended directors and the alleged misconduct is not made, most likely because of legal issues (everyone is presumed innocent until proven guilty).
We can safely assume that the authorities (SC and/or BM) are also on this case, possible conflict of interest (without announcing it) and breach of fiduciary duties of directors are quite severe.
Thursday, 15 January 2015
Tanjung Offshore: some shareholder activism (3)
In my previous posting about Tanjung Offshore I wrote:
".... what are "matters arising from recent media reports on the Company"? How do we know which media reports the Board of Directors has knowledge off? Why do they not just list the matters at hand, what exactly is the Independent Committee going to review?"
That question is answered in the latest announcement by the company:
"The duties and responsibilities of the Independent Committee shall be as follows:-
i) To investigate any unauthorized dissemination of Company’s confidential information to the media in the past twelve (12) months and any officer’s breach of fiduciary duty;
ii) To investigate the dissemination of misleading information to the media resulting in negative investor perception of the Company upon publication in the media over the past twelve (12) months
iii) To review the Bourbon transaction based on minutes of the recent Management Committee meeting dated 26 December 2014;
iv) To review the acquisition of the remaining 49% stake in Gas Generators (M) Sdn Bhd which was completed in October 2013, the acquisition of a property in the United Kingdom in 2014 and the resource trading operations in The Philippines; and
v) To engage professionals to perform independent valuation of the said transactions undertaken by the Company (if necessary).
The Independent Committee shall commence its first meeting on 15 January 2015 and is expected to complete this review by end of January 2015."
Hopefully (an extract of) the report regarding the review will be published on Bursa's announcements website shortly after the review has been finished.
".... what are "matters arising from recent media reports on the Company"? How do we know which media reports the Board of Directors has knowledge off? Why do they not just list the matters at hand, what exactly is the Independent Committee going to review?"
That question is answered in the latest announcement by the company:
"The duties and responsibilities of the Independent Committee shall be as follows:-
i) To investigate any unauthorized dissemination of Company’s confidential information to the media in the past twelve (12) months and any officer’s breach of fiduciary duty;
ii) To investigate the dissemination of misleading information to the media resulting in negative investor perception of the Company upon publication in the media over the past twelve (12) months
iii) To review the Bourbon transaction based on minutes of the recent Management Committee meeting dated 26 December 2014;
iv) To review the acquisition of the remaining 49% stake in Gas Generators (M) Sdn Bhd which was completed in October 2013, the acquisition of a property in the United Kingdom in 2014 and the resource trading operations in The Philippines; and
v) To engage professionals to perform independent valuation of the said transactions undertaken by the Company (if necessary).
The Independent Committee shall commence its first meeting on 15 January 2015 and is expected to complete this review by end of January 2015."
Hopefully (an extract of) the report regarding the review will be published on Bursa's announcements website shortly after the review has been finished.
Saturday, 10 January 2015
Tanjung Offshore: some shareholder activism (2)
I blogged about Tanjung Offshore before.
Unfortunately, it looks like Tanjung's problems only have increased. In other words, shareholders should stay alert and active.
Firstly, on November 20, 2014 the company announced its third quarterly results, which were far from inspiring, in the contrary:
Secondly, the company announced:
"We refer to the article entitled “Tanjung Offshore to abort Bourbon RTO deal?” that appeared on The Edge Financial Daily today.
On behalf of the Board of Directors of Tanjung (“Board”), AFFIN Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (“AFFIN Hwang IB”) wishes to announce that Tanjung and the Vendor Group (as defined in the announcement dated 5 June 2014 comprising Farid Khan Bin Kaim Khan and his business partners, Mower Tunggal Jaya PT, Megagold Indonesia PT and Zona Maju Mapan PT and their business partners and Bourbon Far East Pte Ltd) have, via an exchange of letter, mutually agreed to terminate the heads of agreements in relation to the Proposals (“HOAs”) on 29 December 2014 (“Termination Letter”) with immediate effect without any legal and financial recourse against each other."
May be not unexpected, the termination itself, but still, it always appeared to be a rather strange deal.
And why does the company need to react on an article of The Edge, why did it not proactively announce the news itself?
KiniBiz wrote "Was Tanjung Offshore venture doomed from the start?" (behind paywall). Some snippets:
Tanjung Offshore’s case was definitely not aided by their lack of disclosure of the deal, even to their own shareholders. A Bursa Malaysia announcement, which came out after the minority shareholders’ spokesperson had reached out to the media, was a statement that the deal would be negotiated to benefit all shareholders, and that yes, they were negotiating a waiver from Ekuinas for the three-year non-competition clause of the sale. Why is it that minority shareholders, who are most definitely shareholders, by the way, were marginalised to such an extent, as to not know of the proceedings of the deal? Tiger smells something fishy, and not of the good variety, either.
It all just seems a mess. Why did Tanjung Offshore not secure a waiver from Ekuinas before proposing the deal? Why was the deal not made with proper regard to global oil prices at the time? Did the group not see the potential fall in oil prices? Why were shareholders marginalised?
Thirdly, the company announced:
"The Board of Directors of Tanjung Offshore Berhad ("Company") wishes to announce that the Board has formed an Independent Committee to review and make recommendations on matters arising from recent media reports on the Company."
That looks like a good move, given all the events that have happened.
But it sounds very passive, the company should have been much more transparent and proactive, corporate governance standards appear to be very poor.
Also, what are "matters arising from recent media reports on the Company"? How do we know which media reports the Board of Directors has knowledge off? Why do they not just list the matters at hand, what exactly is the Independent Committee going to review?
In Focus Malaysia of Jan 10-16, 2015 an article "Tanjung Offshore has host of issues to tackle", some snippets:
A group of minority shareholders has claimed the company’s acquisition of an office building in Birmingham requires a shareholder nod, contrary to the company’s claim it did not need such an approval.The Malaysian Anti-Corruption Commission (MACC) is also believed to be looking at the company’s acquisition of the remaining 49% stake, worth RM34.3 mil, in Gas Generators (M) Sdn Bhd (Gastec, pictured) in October 2013. Based on documents provided to FocusM by minority shareholders, the company spent RM58.07 mil to purchase the Birmingham property. Thus, the deal exceeds the maximum 25% threshold and requires Tanjung Offshore to seek shareholder approval. “In this case, the minority shareholders’ interest has been compromised. The right to vote has been hijacked by the board of directors,” claims a representative for the group of minority shareholders, who collectively hold a 4.9% stake in the company.
Unfortunately, it looks like Tanjung's problems only have increased. In other words, shareholders should stay alert and active.
Firstly, on November 20, 2014 the company announced its third quarterly results, which were far from inspiring, in the contrary:
Secondly, the company announced:
"We refer to the article entitled “Tanjung Offshore to abort Bourbon RTO deal?” that appeared on The Edge Financial Daily today.
On behalf of the Board of Directors of Tanjung (“Board”), AFFIN Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (“AFFIN Hwang IB”) wishes to announce that Tanjung and the Vendor Group (as defined in the announcement dated 5 June 2014 comprising Farid Khan Bin Kaim Khan and his business partners, Mower Tunggal Jaya PT, Megagold Indonesia PT and Zona Maju Mapan PT and their business partners and Bourbon Far East Pte Ltd) have, via an exchange of letter, mutually agreed to terminate the heads of agreements in relation to the Proposals (“HOAs”) on 29 December 2014 (“Termination Letter”) with immediate effect without any legal and financial recourse against each other."
May be not unexpected, the termination itself, but still, it always appeared to be a rather strange deal.
And why does the company need to react on an article of The Edge, why did it not proactively announce the news itself?
KiniBiz wrote "Was Tanjung Offshore venture doomed from the start?" (behind paywall). Some snippets:
Tanjung Offshore’s case was definitely not aided by their lack of disclosure of the deal, even to their own shareholders. A Bursa Malaysia announcement, which came out after the minority shareholders’ spokesperson had reached out to the media, was a statement that the deal would be negotiated to benefit all shareholders, and that yes, they were negotiating a waiver from Ekuinas for the three-year non-competition clause of the sale. Why is it that minority shareholders, who are most definitely shareholders, by the way, were marginalised to such an extent, as to not know of the proceedings of the deal? Tiger smells something fishy, and not of the good variety, either.
It all just seems a mess. Why did Tanjung Offshore not secure a waiver from Ekuinas before proposing the deal? Why was the deal not made with proper regard to global oil prices at the time? Did the group not see the potential fall in oil prices? Why were shareholders marginalised?
Thirdly, the company announced:
"The Board of Directors of Tanjung Offshore Berhad ("Company") wishes to announce that the Board has formed an Independent Committee to review and make recommendations on matters arising from recent media reports on the Company."
That looks like a good move, given all the events that have happened.
But it sounds very passive, the company should have been much more transparent and proactive, corporate governance standards appear to be very poor.
Also, what are "matters arising from recent media reports on the Company"? How do we know which media reports the Board of Directors has knowledge off? Why do they not just list the matters at hand, what exactly is the Independent Committee going to review?
In Focus Malaysia of Jan 10-16, 2015 an article "Tanjung Offshore has host of issues to tackle", some snippets:
A group of minority shareholders has claimed the company’s acquisition of an office building in Birmingham requires a shareholder nod, contrary to the company’s claim it did not need such an approval.The Malaysian Anti-Corruption Commission (MACC) is also believed to be looking at the company’s acquisition of the remaining 49% stake, worth RM34.3 mil, in Gas Generators (M) Sdn Bhd (Gastec, pictured) in October 2013. Based on documents provided to FocusM by minority shareholders, the company spent RM58.07 mil to purchase the Birmingham property. Thus, the deal exceeds the maximum 25% threshold and requires Tanjung Offshore to seek shareholder approval. “In this case, the minority shareholders’ interest has been compromised. The right to vote has been hijacked by the board of directors,” claims a representative for the group of minority shareholders, who collectively hold a 4.9% stake in the company.
Saturday, 21 June 2014
Tanjung Offshore: some shareholder activism
Update: please check out this blog for all oil & gas related matters.
Tanjung Offshore has been in the news lately.
First of all there is an article in The Star: "A tale of two waivers".
Waivers should only be granted in exceptional and extenuating circumstances. One wonders what is the basis for Tanjung Offshore Bhd asking for two significant waivers: one from Ekuiti Nasional Bhd (Ekuinas) against a non-competing clause and another from the Securities Commission (SC) to waive the requirement for Tanjung Offshore’s new shareholders from having to make a mandatory general offer (MGO) despite buying up more than 33% of the company.
To recap, Tanjung Offshore has reportedly already asked Ekuinas to waive the clause (that was inked back in 2012 when the fund bought the offshore support vessels business from Tanjung Offshore) that prohibits Tanjung Offshore from getting into a similar business until mid-2015.
Tanjung Offshore is in the midst of a reverse takeover (RTO) exercise that will see it buying marine vessels from several parties who would end up with more than 33% of the company. Tanjung Offshore is seeking a waiver from the MGO rule. A group of minority shareholders, on the other hand, are opposing this.
It is difficult to fathom why Ekuinas should grant Tanjung Offshore a waiver. Ekuinas had done right by including the non-competitive clause after paying a whopping RM220mil for Tanjung Offshore’s OSV assets.
Ekuinas’ planned floatation of Icon Offshore Bhd (which is essentially the asset it had acquired from Tanjung Offshore) already has some challenges in the form of seemingly toppish valuations and one report questioning the certification of some of Icon Offshore’s vessels. The last thing it would need is having another competitor creep into the same sector.
As far as the MGO waiver is concerned, it should be opposed as minority shareholders should be protected in this deal by offering them a chance to exit the business at the same price the new shareholders are buying into the company.
I like to draw the readers attention to the word "whopping". To put things in perspective, these assets were injected into Icon Offshore, a company that will IPO at a valuation of RM 2.2 Billion. In other words exactly ten times the price that Tanjung received for its assets. I have to admit, there were other assets in Icon Offshore, and Ekuinas might have injected funds or loans into Icon Offshore. But still, there is a huge valuation gap, and I would not immediately assume that Tanjung received a whopping amount. My guess is that the deal in 2012 was very good for Ekuinas, not so much for Tanjung Offshore. That assumption is also based on the fact that part of the IPO proceeds of Icon Offshore will go towards its existing shareholders and part will be used to shore up its balance sheet.
One group of Tanjung Offshore minority shareholders seems to have this same opinion, according to this article in The Malaysian Insider: "16 minority shareholders oppose Tanjung deal, say they are shortchanged".
“The directors have a bad track record when it comes to striking deals, and this transaction does not look good,” Chuah told The Malaysian Insider yesterday.
My guess is that Chuah was referring to the sale of its assets to Ekuinas in 2012.
"If Tanjung is exempted from the MGO, the new owner or investor will become the controlling shareholder. This means we don't have the option of cashing out and will have to go along with whatever deal that is struck.” Chuah said that with the RTO, Tanjung is expected to return to the same business it disposed of two years ago, as Bourbon is involved in marine vessel services. Chuah fears that the minority shareholders would be asked to cough out extra cash in order to complete the deal, and questioned why they were excluded from the deal.
The CI is currently in record territory, but the share price of Tanjung Offshore has languished, despite being in an industry that is perceived to be quite "hot" these days. The company did pay out a dividend of RM 0.44 in 2012, which explains the sudden drop (the share going "ex"), but other then that, the share has performed very disappointingly. Another indication that things have not gone very well for the company.
Tanjung Offshore has been in the news lately.
First of all there is an article in The Star: "A tale of two waivers".
Waivers should only be granted in exceptional and extenuating circumstances. One wonders what is the basis for Tanjung Offshore Bhd asking for two significant waivers: one from Ekuiti Nasional Bhd (Ekuinas) against a non-competing clause and another from the Securities Commission (SC) to waive the requirement for Tanjung Offshore’s new shareholders from having to make a mandatory general offer (MGO) despite buying up more than 33% of the company.
To recap, Tanjung Offshore has reportedly already asked Ekuinas to waive the clause (that was inked back in 2012 when the fund bought the offshore support vessels business from Tanjung Offshore) that prohibits Tanjung Offshore from getting into a similar business until mid-2015.
Tanjung Offshore is in the midst of a reverse takeover (RTO) exercise that will see it buying marine vessels from several parties who would end up with more than 33% of the company. Tanjung Offshore is seeking a waiver from the MGO rule. A group of minority shareholders, on the other hand, are opposing this.
It is difficult to fathom why Ekuinas should grant Tanjung Offshore a waiver. Ekuinas had done right by including the non-competitive clause after paying a whopping RM220mil for Tanjung Offshore’s OSV assets.
Ekuinas’ planned floatation of Icon Offshore Bhd (which is essentially the asset it had acquired from Tanjung Offshore) already has some challenges in the form of seemingly toppish valuations and one report questioning the certification of some of Icon Offshore’s vessels. The last thing it would need is having another competitor creep into the same sector.
As far as the MGO waiver is concerned, it should be opposed as minority shareholders should be protected in this deal by offering them a chance to exit the business at the same price the new shareholders are buying into the company.
I like to draw the readers attention to the word "whopping". To put things in perspective, these assets were injected into Icon Offshore, a company that will IPO at a valuation of RM 2.2 Billion. In other words exactly ten times the price that Tanjung received for its assets. I have to admit, there were other assets in Icon Offshore, and Ekuinas might have injected funds or loans into Icon Offshore. But still, there is a huge valuation gap, and I would not immediately assume that Tanjung received a whopping amount. My guess is that the deal in 2012 was very good for Ekuinas, not so much for Tanjung Offshore. That assumption is also based on the fact that part of the IPO proceeds of Icon Offshore will go towards its existing shareholders and part will be used to shore up its balance sheet.
One group of Tanjung Offshore minority shareholders seems to have this same opinion, according to this article in The Malaysian Insider: "16 minority shareholders oppose Tanjung deal, say they are shortchanged".
“The directors have a bad track record when it comes to striking deals, and this transaction does not look good,” Chuah told The Malaysian Insider yesterday.
My guess is that Chuah was referring to the sale of its assets to Ekuinas in 2012.
"If Tanjung is exempted from the MGO, the new owner or investor will become the controlling shareholder. This means we don't have the option of cashing out and will have to go along with whatever deal that is struck.” Chuah said that with the RTO, Tanjung is expected to return to the same business it disposed of two years ago, as Bourbon is involved in marine vessel services. Chuah fears that the minority shareholders would be asked to cough out extra cash in order to complete the deal, and questioned why they were excluded from the deal.
The CI is currently in record territory, but the share price of Tanjung Offshore has languished, despite being in an industry that is perceived to be quite "hot" these days. The company did pay out a dividend of RM 0.44 in 2012, which explains the sudden drop (the share going "ex"), but other then that, the share has performed very disappointingly. Another indication that things have not gone very well for the company.
For me, I have some doubts about the industry. The perception seems to be that there will be lots of growth due to "juicy" contracts by PETRONAS. I doubt that these contracts will be that juicy. Next to that, it seems every single company in this business is raising money to further increase its fleet. Somehow or the other, that doesn't make much sense. And lastly, activities onshore have hugely increased (for instance in North-America) recently through the use of "fracking":
Hydraulic fracturing is the fracturing of rock by a pressurized liquid. Some hydraulic fractures form naturally—certain veins or dikes are examples. Induced hydraulic fracturing (also hydrofracturing, fracking, and fraccing) is a mining technique in which a high-pressure liquid fluid (usually water mixed with sand and chemicals) is injected to a wellbore in order to create small fractures (usually less than 1.0 mm wide) in the deep-rock formations in order to allow natural gas, petroleum, and brine to migrate to the well.
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