E&O AGM: Orchestrated to concert perfection

Eastern & Oriental Berhad’s Annual General Meeting was held on Friday.
One major item on the agenda was the nomination of ECM Libra Financial Group Bhd’s representatives to the Board of Directors and the re-election – or as the term used by the Bernama report, reappointment – of E&O chairman Azizan Abdul Rahman, managing director Terry Tham, and two other directors.

Bernama reported that 75% of the shareholders present rejected ECM Libra’s nomination, while 90 to 95% overwhelmingly voted for the reappointment of Azizan, Tham, Henry Chin, and Vijay.

That seemed like business as usual.

The same report quoted E&O Deputy Managing Director Eric Chan Kok Leong as claiming that shareholders gave overwhelming support for the collaborative agreement with Sime Darby Berhad (Sime Darby).

That is a business-as-usual, sanitised, positive remark from any businessman and corporate man.

With some knowledge of how AGMs and EGMs are staged and handled in Malaysia, shareholders may not have received the proper answers and most answers are sanitised. In any AGM and EGM of PLCs, there is more at work behind the scenes than meet the eye.

Despite the claim of support, Chan said, “The energy is high. They (shareholders) have more questions than usual.” What were the questions raised by the floor? How were they answered? Were they handled satisfactorily? Was there any suppression or diversion of issues raised by the floor?

The Chairman is Azizan, the controversial husband to the Chairperson of Securities Commission, Tan Sri Zarinah Anuar.

Read the Bernama report first:

E&O shareholders reject nomination of ECM Libra’s nominees

September 30, 2011

KUALA LUMPUR: Eastern & Oriental Bhd (E&O) shareholders today rejected ECM Libra Financial Group Bhd’s nominees – Mahadzir Azizan and Leong Kam Weng – to the company’s board of directors.

About 75% of the shareholders who attended the property developer’s annual general meeting (AGM) here, voted against ECM Libra’s request, E&O deputy managing director Eric Chan Kok Leong told reporters.

Mahadzir is currently a director of ECM Libra, Syarikat Takaful Malaysia Bhd, ECM Libra Investment Bank Bhd, Libra Invest Bhd and several other companies, and is a member of the investment committee of Amanah Raya REITS.

Leong sits on the board of directors and audit committee of TA Enterprise Bhd and TA Global Bhd.

As of Sept 22, ECM Libra holds 6.3% of E&O, making it the second largest shareholder after Sime Darby Bhd which owns 30% equity interest.

Sime Darby acquired its stakes from E&O managing director Terry Tham (12.2%), Wan Azmi Hamzah (9.1%) and GK Goh Holdings of Singapore (9.5%) on Sept 9 for RM766 million or RM2.30 per share.

After the sale, Tham still has 5.1% while Wan Azmi and GK Goh hold 2.9% and 3.5% respectively.

Chan said about 60% of the shareholders of E&O attended the AGM which lasted about four hours.

He said between 90% and 95% of the shareholders voted for the reappointment of E&O chairman Azizan Abdul Rahman, managing director Tham and two other directors – Henry Chin Poy Wu and Vijayaratnam Thamotharam.

“We received overwhelming support from the shareholders. The energy is high. They (shareholders) have more questions than usual,” he said after the AGM.

Chan also said E&O would hold its first meeting with Sime Darby in October to identify areas that both parties could work together.

“We’ve signed a collaborative agreement with Sime Darby. We’ll call for the first meeting next month in accordance with the agreement,” he said.

E&O and Sime Darby signed the three-year collaborative agreement on the same day share sale deal was concluded.

Chan said the group was now focusing on promoting E&O’s unique brand proposition as a true lifestyle developer.

He added that the strategic corporate recognition attained by the group from its sales and marketing collaboration with Mitsui Fudosan Co Ltd – the joint venture with subsidiaries of Khazanah Nasional Bhd and Temasek Holdings Pte Ltd to develop an iconic wellness township in Iskandar Malaysia – as well as the entry of Sime Darby would provide vital impetus for the group to move forward with its growth strategy. - Bernama

Did shareholders ask about insider trading?

All three parties involved in the sale of the 30% block to Sime Darby had existing shares in the company and bought some shares prior to the announcements of a share sale agreement and a collaborative agreement.

It is widely known that Chairman Azizan bought 100,000 shares on August 16th, about two weeks before the announcement. Some commentator defended Azizan with the argument that he has all along been holding few million shares in the Company. So what?

All members of the Board of Directors with shares in the company are confined to buying and selling shares in the company to within certain periods. Those “windows” are before and after a General Meeting, important price sensitive announcements, etc. It is unthinkable and almost impossible that the Chairman was not notified or alerted of an impending major corporate move two weeks before the announcement.

Not only that, Azizan also bought 100,000 and 50,000 shares on April 1st and April 6th respectively. That was less than six months before the announcement. If one refers to the simple chart below, that was the time of the initial market effort to “push” the shares




The collaborative agreement was signed on the same day as the share sale agreement between E&O managing director Terry Tham (12.2%), Wan Azmi Hamzah (9.1%) and GK Goh Holdings of Singapore (9.5%) and Sime Darby for the block of 30% valued at RM766 million or RM2.30 per share. The date was Sept 9th.

We have extracted from the Bursa website here:

http://www.bursamalaysia.com/website/bm/listed_companies/company_announcements/changes_in_s_holding/historical.jsp

Note the list of changes in shareholding of E&O for a period of six months before the announcement.

Except for few purchases from ECM Libra and “secretive” off-shores accounts, most of the transactions were interested parties of vendors Terry Tham, Wan Azmi and GK Goh Holdings, Singapore and their related people and company directors.

They were having a good time taking a crack at this insider information!

Why is ECM Libras seeking Board representation?

Referring to the Bursa list again, ECM Libra and Tan Sri Azman Hashim joined in the fray from sometime in May 2011. Could the off-shore accounts be theirs too?

That question is asked because this blogger got wind of a conversation over lunch at a restaurant between Dato’ Kalimullah Hasan and Ayub Ali, the Managing Director of Bumiwerks Sdn Bhd, a boutique financial services company.

Ayub is an open secret. He is a close associate and has had a long, personal relationship with Tan Sri Nor Mohamad Yakcop since their days in the Bank and Bank Negara Malaysia in the currency. In fact, Ayub is widely believed to be an adopted brother of Nor Yakcop.

In their rather loud conversation, typical of mamak, Ayub spoke of having acquired interest in E&O. Former traders and gamblers like Ayub and Nor Yakcop do not play with just a few shares but deal in millions of shares. Ayub could likely be holding interest for Nor Yakcop as well.

Without consideration for nearby ears eavesdropping on their conversation, he told Kalimullah to speak to Zarinah and go for a General Offer for them to cash out.

ECM Libra has only 6.3% of E&O but their interest to be represented on the Board of Director of E&O only shows they have a substantial amount of shares in E&O. It would not be a surprise if the likes of Ayub, offshore “secretive” accounts, etc. were working in concert with ECM Libra.

The fact that Kalimullah has been asked to speak to Zarinah is a lead that either Azizan or CIMB has tipped them off.

Azizan is a close business associate of Kalimullah. He is together with Kalimullah on the Board of Directorship of few PLCs and took over MBf Holdings many years ago. CIMB, meanwhile, is an adviser to ECM Libra.

Did shareholders ask about a General Offer?

With the collaboration agreement brought together immediately after the sales of shares to Sime Darby, why did Wan Azmi make the remark that the vendor could vote their own way?

Read The Star report below:

Tuesday September 20, 2011

E&O shareholder Wan Azmi says no agreement to exercise voting shares according to Sime Darby’s interest

PETALING JAYA: Sime Darby Bhd and Eastern and Oriental Bhd (E&O) continue to make the news as both their share prices moved again in opposite directions on speculation that the former will launch a general offer (GO) for the latter's shares.

Sime Darby declined by 30 sen, seeing about RM1.8bil of its market capitalisation wiped out, while there was active trading in E&O shares, which ended the day 2 sen up.

The Securities Commission, which is looking into whether Sime Darby would be required to conduct a GO for the rest of the shares in E&O after buying a 30% block in the latter (at a 60% premium to market), has yet to make a decision on the matter.

Meanwhile, major shareholder and part seller of the 30% block of E&O shares Tan Sri Wan Azmi Wan Hamzah told StarBiz that there was absolutely no agreement or understanding between himself and Sime Darby on how he would exercise his voting rights on the remaining E&O shares he owned.

“There is absolutely no agreement to submit to Sime Darby's wishes in the future what a preposterous thought,” he said in an interview at his office.

“If any resolutions come up to vote I will act as I have always acted, support it if it's good for the company and oppose it if it's bad,” he said.

While the Takeover Code states that a mandatory general offer (MGO) is only triggered by a 33% or more change in shareholding, there are other instances in which an MGO can be required by the regulator.

According to Para 6.2 of Practice Note 9 of the Takeover Code 2010, the SC has the right to consider all surrounding circumstances to deem if control has been passed to a new party, including the premium to market that was paid for those shares.

Wan Azmi also confirmed that Sime Darby's purchase of the 30% block of shares from himself, Datuk Terry Tham (the managing director of E&O) and GK Goh Holdings Ltd of Singapore had been completed, with full payment made and the shares crossed.

Wan Azmi said he had owned E&O shares since 2006 which is part of his portfolio of public equity investments. Having been an active corporate player in the 1990s, he seemed to have vanished from the limelight in the aftermath of the 1997-98 Asian financial crisis.

He also has stakes in UK-listed PureCircle Ltd, Kazakhstan-based Steppe Cement Ltd and is reportedly involved in mining activities, including gold. He also owns the Rohas Perkasa building in Kuala Lumpur, which houses his small but tastefully-decorated and art-filled office of Halfmoon Bay Capital Ltd, where this interview took place.

Sime Darby's share price ended the day at RM7.70 after reaching a new 52-week low of RM7.65 during the day. Along with E&O, both stocks were among the most actively-traded counters on Bursa Malaysia.

An MGO will cost Sime Darby an additional RM1.8bil to acquire the remaining 70% of E&O, on top of the RM761mil cash it has paid for the 30% stake.

An analyst said the market was pricing in the possibility of Sime Darby having to do the GO even before it was required to do so.

“Sime Darby is now trading at its lowest valuation range of close to 12 times price-to-earnings ratio. Even if there is an MGO, the worst case is that it will forgo its one-year capital expenditure,” he said.

The group's plantation and industrial divisions should be able to maintain the group's financial performance, he added.

An analyst with a foreign bank-backed research house pointed out that even if an MGO was needed, Sime Darby had the money to do the deal.

“The acquisition is just such a small component compared with the group's overall operations,” she said.

However, both analysts said they weren't advising their clients to buy into Sime Darby on its weakness, considering the uncertainty with regard to its obligation to do a GO for E&O.

It is not only the remaining shares being questioned for insider trading. Who is Wan Azmi trying to fool?

With the collaboration agreement signed by all of them, Wan Azmi (3.9%), Terry Tham (5%) and GK Goh Holding (2.5%) with Sime Darby (30%) are considered to be working in concert. It means their total holdings are 36.9%, which has exceeded the 33% trigger point.

Much as I hate to see Sime Darby being taken for a ride by ECM Libra, they are supposed to do a General Offer. Why didn’t Sime Darby see all this?

As Dato Bakke Salleh said, that Sime Darby is capable of fulfilling the GO is one thing; aren’t the share vendors supposed to do a GO also?

Did shareholders ask about CIMB’s conflict of interest?

This blog and also blogger Big Dog raised the points of conflict of interest and the unprofessional conduct of CIMB.

CIMB was an advisor of ECM Libra who is taking a ride on this collaboration; words is that they backstabbed ECM Libra’s intention to acquire and do an asset strip by showing the 30% block to Sime Darby, another client of theirs in the humongous tri-merger failure.

That is another conflict of interest that missed the eyes of many.

In June 2005, CIMB took control of GK Goh Securities Singapore by acquiring a 51% stake from Goh Geok Khim. Part, if not all of the remaining 49% in GK Goh Securities is probably held by GK Goh Holdings or related parties of GK Goh Holdings.

Isn’t it a conflict of interest and unprofessional on CIMB’s part to be involved in this deal and the various unprofessional dealing manouvres?

Probably, there are many other issues that need to be raised. Did the shareholders raise all these issues or did they just not bother?

If they didn’t bother, they should realise that any offenses committed by officials of a company may have strong implications on future approvals from the SC for the company to conduct business in the future.

Having been involved in AGMs and EGMs of PLCs, shareholders do not care and in all likelihood, the interested parties have cornered the shares and any issues raised will be stonewalled by the Chairman of the meeting, Board of Directors and other interested shareholders.

Was the E&O AGM so well orchestrated that the shareholders re-elected the conductor and friends, and gave them a pat on the back for the lullaby, with magic shows during the interval?

- Another Brick in the Wall