From former CEO of PNB & Guthrie on *the* Mega Merger December 1, 2006Posted by elizabethwong in Economy, Malaysia, Readings.
Media Prima-NSTP’s gobbling up of Utusan – *Yawn*.
Here’s the real deal.
Also see: Off The Edge, December issue, Cover Story.
29th November 2006
The announcement relating to the proposal to merge Sime Darby, Guthrie and Golden Hope raises corporate governance issues
Mergers and takeovers are part and parcel of the capital market, the focus should be on increasing efficiency. At the same time, the rights of minority shareholders must be taken into consideration and they be given a chance to make choices.
While the final documents have not been provided to shareholders, there are various statements by CIMB, government leaders and the substantial shareholders regarding the proposal by a Special Purpose Vehicle – Synergy Drive Sdn. Bhd. to take over and merge Sime Darby Bhd., Kumpulan Guthrie Bhd. and Golden Hope Plantations Bhd. are cause for concern.
First, the proposal was initiated not by one of the three companies or its substantial shareholder – Permodalan Nasional Berhad (PNB) but rather by an investment bank.
PNB’s statement indicating they has no idea about the proposal and will have to study it first is very frightening. PNB is the major shareholder in two of the companies and have a substantial holding in the other. This calls into question PNB’s ability to manage and control its assets. Surely the statement came as a shock to the more than 8 million investors in various PNB’s trust funds.
It does not make sense PNB did not know of the proposal beforehand for they not only have board representation in all three companies, but the Chairman of PNB is also Chairman of two of the companies involved.
Second, in order to undertake the studies needed to come up with this proposal, Synergy Drive must have needed information from the companies involved. If the information used were not restricted to public documents, than the issue of insider trading comes to fore.
The Board of Directors of all the three companies involved should make a public announcement that this matter was never discussed at the Board meetings and the management has assured the Board that no information was passed to outside parties.
From PNB’s statement it can be deduced that PNB and the three companies are not involved in the preparation of the proposal by Synergy Drive. In order to evaluate the offer by Synergy Drive, the Board of Directors of the three companies must make sure Synergy Drive gives an undertaking that all professional advisory expenses especially the merchant bankers (investment bankers) advising independent directors of the respective companies and secretarial expenses are borne by Synergy Drive.
Thirdly, the Deputy Prime Minister and later the Prime Minister publicly commented on the proposal and state that it is a good thing whereas PNB was still in the dark about it. How this could have happened when the Prime Minister and his deputy are both trustees of Yayasan Pelaburan Bumiputra, the parent entity of PNB.
The Kuala Lumpur Stock Exchange, Securities Commission and the minority shareholders watchdog must take all steps necessary to ensure the interest of minority shareholders are not compromised in this process.
To evaluate the proposal on its needs and benefits, clearly the possibility of increasing efficiency in the plantation sector is very minimal. The synergy for common research centre and information management is not there.
In fact, if research facilities are developed separately by the three companies, it will allow competitiveness and thus will bring more benefit to the country.
It is now time to gather all interested shareholders to a town hall meeting in order to understand the intricacies of the proposal and put forward new ideas and make informed decisions.
Tan Sri Abdul Khalid Ibrahim
Treasurer, People’s Justice Party (KeADILan)
Former CEO of PNB and Kumpulan Guthrie