QUOTE(MrBuBu @ Jan 22 2014, 04:00 PM)
SP Setia slowly taken over by other ppl rite
Rite...
http://www.kinibiz.com/story/tigertalk/530...9D-dilemma.htmlPNB’s “SP Setia and Liew” dilemma
STORY BY
P. GUNASEGARAM
guna@kinibiz.com
tiger-talk-2zThe way Tiger sees it, Permodalan Nasional or PNB is in quite a pickle. It has undertaken not to get involved in developer SP Setia’s management. But its president and CEO Liew Kee Sin may be moving to a rival and may well take others with him. Should PNB sit on its hands and do nothing in the meantime? If it were a Tiger, it won’t.
In the corporate jungle, Tiger goes by a number of rules. One of these is a simple one – if you don’t know what to do with a company you want to take over, then stay an investor and keep the stake below a level at which you don’t have to acquire a majority interest in the company.
If you do acquire majority control and ruffle feathers and more, and if top staff leave in droves, then be prepared to put your own people in at the apex, restore confidence and run the company as good or better than before.
SP Setia is Malaysia’s foremost property company and perhaps equally as famous is its president and CEO and one-time major shareholder Liew Kee Sin, widely credited with building up the company from scratch.
Unlike many other Malaysian tycoons, Liew and associates, the main ones of whom are Voon Tin Yow (currently his deputy at SP Setia) and Teow Leong Seng (chief financial officer), somehow did not keep majority control of SP Setia but steadily decreased their stakes. Both Voon and Teow are SP Setia directors.
That puzzled Tiger. Why would they do that? Tiger will have to go into the realm of conjecture and offer only possible answers. Perhaps there were other backers who preferred to exit and who were happy to sell to whoever was accumulating.
That somebody else who had been accumulating SP Setia shares was one of Malaysia’s largest funds Permodalan Nasional (PNB), and associated interests who by 2011 had acquired just under 33%, the trigger point at which a mandatory general offer would have to be made. At that time, Liew’s direct and indirect interests amounted to about 11%.
But things continued as per normal – PNB had two board representatives, less than interests aligned with Liew who had five at least. PNB and other government-linked funds, controlled over 50%, making SP Setia effectively a bumiputera company which gave it leverage to do land deals with the government. Crucially, management was firmly vested with Liew and associates.
And then PNB did something unwise and strategically confounding – it pushed its stake above 33%, triggering a mandatory general offer, which it duly made in Sept 2011 at RM3.90 a share. The floodgates were opened and the protests cascaded. Cries of backdoor nationalisation were heard, and in race-crazy Malaysia the not-so-soft whispers talked of Chinese businesses being taken over by Malay/bumiputera interests.
SP-Setia buildingTiger being apolitical and more than a bit naive here, wondered aloud: But was not SP Setia already Malay-owned? This was met with suitably disapproving glares which chastened Tiger, but only a bit, as Tiger has a distaste for racial politics.
But Tiger understood well the ramifications. Once PNB gets majority control, it will want board control and that may spell the end of independence for Liew and associates too. To put it bluntly, PNB’s hostile takeover bid evoked hostility too and that just would not do. What if Liew and gang just upped and left?
Tiger is not sure whether PNB thought about that and was prepared to move in. That would have been brave but reckless because none of PNB’s property units, Sime Darby included, had developed the kind of innovativeness, push, panache and marketing coupled with the delivery that SP Setia had. That is why the move was confounding. Why did PNB not attempt to make the takeover friendly?
Recall that at the time of that takeover, the election game was being played out and it just would not do to have Chinese resentment and voter backlash by letting the takeover go through in its format then. It was said that no less than the prime minister intervened to rectify matters.
So this takeover was aborted and another one put in place instead. The offer price was a mere five sen higher at RM3.95 a share. This time there were joint offerors – PNB, and yes, smart reader that you are you guessed it, Liew. It was silly to call it a joint offer because PNB would still be doing the buying.
The real difference was this: a management agreement which gave Liew total executive powers subject to board control in governance and strategic matters. And from what Tiger could see from an examination of the board composition, PNB’s numbers on the board have remained at just two post-takeover, less than those aligned with Liew which at that time would have amounted to at least five.
pnb-logoAccording to the management agreement, PNB’s involvement is only through its representation on the SP Setia board while day-to-day operations will be led by Liew for the tenure of the management agreement which is three years, unless his appointment is terminated earlier. Reports put Liew’s leaving date sometime in March 2015. The agreement was made in January 2012.
As an incentive for Liew to stay on, PNB gave a put option to Liew to sell his direct over-8% stake in SP Setia in three tranches over three years, effectively giving him a floor exit price of RM3.95 even if the price of the shares fell below that. The share price traded recently around RM3.20.
This was no incentive at all. As a joint offeror for the takeover of SP Setia, he should have been required to just keep the stake and take his chances with market movements. If he did well, he would reap the benefits from higher share prices.
As it is, Liew got the best of both worlds – a high exit price even if the share did not perform and management control to boot even if he exercised part of the options. His direct stake has been whittled down to below 3% from over 8% as he exercised his options but he is still firmly in the driver’s seat. How odd!
At the end of PNB’s revised offer (Tiger excludes Liew here because he was joint offeror in name only) it ended up, together with associate companies, owning nearly 70% of SP Setia, a management agreement which gave Liew total executive powers and for PNB still just two representatives on the board.
That’s a bum deal for PNB in every way – it has taken over the company but has absolutely no say in management and does not even have board control which implies no control over even strategic or governance matters. Again, how odd!
The hope was that Liew would do his utmost for SP Setia in the three years of the management contract. But other events overtook this, leading to serious questions of conflict for Liew which are yet to be resolved. It changed the game completely for SP Setia and PNB to the disfavour of both entities.
ecoworld thumbLess than a year after PNB’s takeover of SP Setia, a new and rapidly rising name in property emerged – Eco World Development which is making waves throughout the property circle. Note the “Eco” in it. Its main properties have the “eco” in it too – EcoSky, EcoBotanic, EcoBusiness Park etc.
That’s much like many of SP Setia’s higher end projects – Setia Eco Park, Eco City, Eco Glades, Eco Hills. It’s getting to be very difficult to differentiate one from another. In fact, Eco World is staffed by former top executives of SP Setia. Interestingly, Liew’s son, Liew Tian Xiong, at 22 and a 2012 graduate from Melbourne University, is on the board of Eco World.
Meantime, Eco World, together with Tian Xiong has already bought a 65% stake in listed developer Focal Aims at RM1.40 a share or some RM230 million and is making an offer for the remaining shares. Of the 65%, 35% (more than half) is owned by Tian Xiong and that would have cost about RM124 million.
Eco World and SP Setia picTiger says tender Tian Xiong cannot have that kind of money at his disposal – it must come from his father, don’t you think? In fact, that is confirmed in a Focal Aims announcement to Bursa Malaysia where Liew and his wife are listed as parties acting in concert for the offer for the rest of Focal Aims as financiers to their son Tian Xiong. The general expectation is for Eco World’s assets, which the company says have a gross development value of RM30 billion, to be injected into Focal Aims via a backdoor listing.
Eventually one can expect Eco World to become a major rival to SP Setia itself. And where would that place Liew?
Isn’t it time PNB satisfies itself as to what Liew’s intentions are? Shouldn’t Liew and PNB CEO Hamad Kama Piah Che Othman have a tete-a-tete and shouldn’t the latter ask the former whether he would stay on in SP Setia or follow his son?
Even if Liew gives his assurance, has PNB evaluated the situation to determine if that is reasonable and fair, to use a term that financial advisers are fond of? And if they have already had the conversation shouldn’t the investing public know the outcome?
And what about Battersea, the RM40 billion project in London? SP Setia and Liew lead this venture which is 40% owned by SP Setia, 40% by Sime Darby and 20% by the Employees Provident Fund. Shouldn’t Sime Darby and EPF be concerned about how Liew will handle this and indeed if he can given his potential conflicts?
Will PNB use its voting power to get additional representation on the board? Will it then make changes at the top and replace Liew with someone else who is demonstrably more committed and has no conflicts of interest?
If PNB does that, can it be sure that Liew’s two lieutenants still remaining in SP Setia, Voon and Teong won’t leave as well? These two have been with Liew for the last 17 years and helped him build SP Setia. Won’t their loyalties be with Liew too? Indeed, would PNB want these two to remain there without Liew? And if they stayed, how confident can PNB be that they will work for SP Setia’s interests?
When is PNB, through its various companies the largest owner of property developers and land banks in the country, going to push for in-house expertise and capability to be built within its various holdings instead of depending on other developers indefinitely?
PNB right now is well and truly pickled over this SP Setia and Liew dilemma. It’s damned if you do and damned if you don’t and sometimes it may be better to be damned doing then damned doing nothing at all.
Tiger knows PNB is no Tiger and the answers are a foregone conclusion. Which leaves this final niggling, disturbing question: What’s going to happen to SP Setia? What’s going to happen to Battersea?
GRRRR.
(This Tiger declares his interest. In furtherance of a tiger’s natural predilection to live somewhere closer to nature, he bought an abode developed by SP Setia some years back.)
Jan 22 2014, 11:28 AM, updated 12y ago
company director resign, 200+ ppl follow him, everyone boikot kompeni liao 
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how come u 2 know wan.. u 2 also work there?
cari makan susah.
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