Jelas Ulung and syndicates make a killing from false markets?
JELAS ULUNG AND SYNDICATES MAKE A KILLING FROM FALSE MARKETS?

KUALA LUMPUR. January 13: There is growing evidence that Jelas Ulung Sdn Bhd’s bid for PLUS Expressways Bhd was nothing more than an elaborate hoax to rig the Malaysian stock market by driving up the target company’s share price.

The creation of a false market in PLUS shares allowed syndicates working in tandem with Jelas Ulung to make a killing by buying low, waiting for the share price of PLUS to spike following the announcement of their sham bid and then dumping the shares to lock in millions of ringgit in profits.

Many small-time retail investors who waded into PLUS shares upon reading of Jelas Ulung’s bid were caught unawares by the scam and lost millions of ringgit as a result.

A post-bid analysis among bankers and analysts point to what is known as a “shadow game” where Jelas Ulung put up the semblance of a serious bid, when in fact it had no intention of completing the purchase of PLUS in the absence of funding for the deal.

The shell game played by Jelas Ulung was nipped in the bud when independent directors of PLUS sought clarity from bidders, forcing Jelas Ulung and the joint bid by UEM Group Bhd and the Employees Provident Fund to provide irrevocable proof of funding along with other documentation.

While UEM-EPF met all requirements by the January 10 deadline, Jelas Ulung failed to furnish even a single document asked by PLUS.

Jelas Ulung could not produce a letter from Bank of China (BOC) confirming the bank was fully funding the bid, though it claimed in its bid submission that BOC had agreed to fund the bid of RM26 billion, along with an additional RM12 billion to retire PLUS debts.

Oddly, Bank Negara’s Exchange Control Department had not been approached by either Jelas Ulung or Bank of China for clearance of the US dollar denominated loan to enter Malaysia.

Exchange control rules require any amount over RM100 million entering the country to be given clearance by Bank Negara. This is deemed basic knowledge by the banking community and for Bank of China to agree to fund RM38 billion without seeking prior approval from Bank Negara raises the question as to whether they were ever behind Jelas Ulung to begin with.

Also, given that Tan Sri Ibrahim Zain, the chairman of Jelas Ulung is an independent director of AMBank Group, he should have been familiar with exchange control rules. In light of these irregularities, he now has to answer questions as to whether the funding from overseas was real or merely a myth.

It has also been learned that Jelas Ulung only spoke once with BOCI, the Bank of China subsidiary in Hong Kong and this was in October 2010. Up to end December of that year, neither the parent BOC nor its subsidiary BOCI in Hong Kong had processed the loan.

On the matter of bidders having to come up with RM50 million by Jan 10, Jelas Ulung failed to do so although UEM-EPF furnished their RM50 million deposit.

While Jelas Ulung says RM50 million was an unusually high figure, bankers retort that the standard breakup fee for major deals is 2% of the deal value, which would have meant a deposit of RM520 million based on the their bid which was valued at RM26 billion.

As an example, the global mining giant BHP Billiton paid out penalties of USD270 million in 2010 as breakup fee for several buyouts it initiated but failed to clinch.

It was quite unusual that no investment bank had been appointed to act on behalf of Jelas Ulung, which is usually considered a must in such large deals as the investment bank would handle regulators, interface with other banks and negotiate with the target company.

A banker said this could have been deliberately done to avoid the investment banker contacting Bank of China to smoothen the passage of money into Malaysia via Bank Negara, as the investment bank would have stumbled on the fact that no loan was actually lined up, should the suspicions proof real.

On another front, financial working papers including information as to how bidders would manage PLUS over the next 12 months was submitted on time by UEM-EPF but Jelas Ulung said this was a new request and they did not have time to prepare such documentation.

However, the same banker who specializes in mergers and acquisitions pointed out that such papers would have been prepared for Jelas Ulung’s own bankers as the basis for securing a loan.

“No bank would agree to lend RM26 billion without in-depth working papers. To say they do not have such working papers clearly shows their bid was a scam.

“All these inconsistencies point to the fact that Jelas Ulung’s RM5.20 a share offer is a mythical figure used to drive up PLUS shares so that syndicates could make a killing.”

Consistent with their intention to abandon the bid once PLUS share price had run up, Jelas Ulung, besides its two directors, did not have any staff on its payroll or permanent office premises to operate from.

Perhaps, this should be clear enough for certain regulatory bodies to look into. - TnT