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Corporate events that grabbed the headlines in 2019

27 Dec 2019 / 17:10 H.

PETALING JAYA: There has been no shortage of corporate news over the course of 2019. From failed mergers to lawsuits, here is a look at some of the most notable happenings that were reported during the year.

1. FGV woes

It’s no secret that FGV has been plagued with issues mostly due to mismanagement; however this year saw reports of the plantation giant potentially being taken over and of disputes over directors’ fees.

In April, a white paper was tabled in Parliament detailing the problems faced by the Federal Land Development Authority (Felda) which brought up the question of its sustainability and the issues of integrity and accountability which contributed much to its financial difficulty and debt problem, which was also felt by the settlers.

The issues highlighted included a conflict of interest in the management and operations resulting in the absence of check and balance for the companies’ investment decisions, the land lease agreement (LLA) between FGV and Felda resulted in Felda’s income declining by over RM1 billion a year and Felda’s weak internal control.

The white paper also listed several improvement steps to improve its governance to boost accountability, integrity and professionalism in Felda, subsidiaries and associate companies including FGV and Felda Investment Corporation Sdn Bhd.

At the group’s AGM, shareholders rejected resolutions pertaining to directors’ remuneration due to unhappiness about the group’s shift in focus if its LLA with Felda is terminated.

Some 64.4% of the shareholders, led by Felda, Koperasi Permodalan Felda and the Armed Forces Fund Board, voted against resolutions relating to its directors’ remuneration.

The resolutions include directors’ fees amounting to RM2.55 million in respect of the financial year ended Dec 31, 2018; the payment of a portion of directors’ fees payable to the non-executive directors up to RM1.18 million from June 26, 2019 until the next AGM to be held in 2020; the payment of benefits payable from June 26 until the next AGM to be held in 2020.

Finally, the resolutions were approved in November, after chairman Datuk Wira Azhar Abdul Hamid took a pay reduction of 50%, but directors’ fees remained at RM120,000.

There was also news of tycoon Tan Sri Syed Mokhtar Al-Bukhary’s plan to acquire FGV, but the speculation was quickly shot down as the group said it was not aware of the proposal.

However, Prime Minister Tun Dr Mahathir Mohamad said should the sale take place, he would not object as long as the transaction benefits both Felda and the government.

2. YTL Cement takeover of Lafarge Malaysia

In May, YTL Cement Bhd entered into an unconditional share sale agreement with Associated International Cement Ltd to acquire about 51% of Lafarge Malaysia Bhd for a total cash consideration of RM1.63 billion.

Consequently, YTL Cement extended a mandatory takeover offer to acquire the remaining Lafarge shares, which managing director Datuk Seri Michael Yeoh Sock Siong reportedly said represented an opportunity for YTL Cement and its subsidiaries to pursue its expansion strategy.

The following month in June, a slew of board changes ensued in Lafarge with Tan Sri Francis Yeoh Sock Ping appointed as its executive chairman, from executive director previously.

Three new independent non-executive directors were appointed to the board of directors of Lafarge Malaysia, while Michael serves as the managing director and Datuk Yeoh Seok Kian, Datuk Yeoh Seok Hong and Datuk Yeoh Soo Keng are executive directors.

Lafarge Malaysia’s name was changed to Malayan Cement Bhd on Oct 7.

3. Genting’s dispute with Century Fox settled

The legal dispute between Genting Malaysia Bhd (GenM) and 20th Century Fox and Disney Co ended with a re-stated memorandum of agreement, which granted GenM the use of certain Fox intellectual properties (IP) for its outdoor theme park in Genting Highlands.

Analysts believe that the restated agreement contains less attractive terms for GenM, compared with the original agreement since it is only allowed to utilise certain Fox IP and the theme park would have to blend in non-Fox IP.

GenM did not clarify which Fox properties had been agreed on under the settlement, nor has the park’s new name or its expected opening date been revealed.

Separately, in August this year, GenM said it was buying a 35% effective stake in Empire Resorts Inc from its controlling shareholder Tan Sri Lim Kok Thay, via Kien Huat Realty III Ltd (KH), in a related party transaction, for RM538 million cash.

Following the share acquisition, GenM and KH decided to jointly take on the privatisation of Empire Resorts for US$9.74 per share.

GenM was hit with a lawsuit by Empire minority shareholder David Mullen claiming that the merger went against the interest of minority shareholders.

Mullen accused Empire Resorts and its board of not providing sufficient information in order to assess the privatisation offer. Furthermore, he claimed the deal was endorsed by board members who would financially benefit from it.

Mullen also claimed Empire Resorts was deemed undervalued based on the privatisation offer of US$9.74 per share.

However on Nov 14, GenM said its proposed privatisation of Empire Resorts would be moving ahead, after it gained approval from Empire shareholders at a special meeting held on Nov 13 for the merger.

4. Axiata-Telenor merger falls through

In May this year, Celcom Axiata Bhd and Digi.Com Bhd’s parent companies Axiata Group Bhd and Telenor ASA proposed a merger of the two telco giants in response to heightened competition, rising data monetisation cost and increasing capital expenditure despite flat revenue growth.

However, by September, talks had mutually dissolved due to “complexities”, although the possibility of a future transaction has not been ruled out.

The merger would have created the largest telco operator in the region.

5. IHH’s Fortis buy not a smooth-sailing deal

In July 2018, IHH Healthcare Bhd said it had won the bid for India’s Fortis Healthcare Ltd, with its indirect wholly owned subsidiary Northern TK Venture Pte Ltd (NTK) proposing to buy a 31.1% stake in Fortis by way of preferential allotment for RM2.35 billion.

This was followed by a mandatory open offer to acquire a 26% stake in Fortis for RM1.97 billion as well as a mandatory open offer to buy a 26% stake in Fortis Malar Hospitals Ltd for RM17 million.

The proposals were completed in November, but it was not smooth sailing. A number of issues with Fortis existed but they were tied to former founders and controlling shareholders Malvinder and Shivinder Singh.

On Dec 14 2018, the Indian Supreme Court ordered IHH’s acquisition of Fortis to be maintained as status quo with regard to the sale of a controlling stake. IHH was thus unable to proceed with its open offer, which would have given it as much as 56% of Fortis, or taking over Fortis Malar Healthcare Ltd.

In November this year, IHH said it remained committed to the acquisition of an additional 26% stake in Fortis Healthcare and Fortis Malar Hospitals once the stay is lifted by the Supreme Court of India. This came after a ruling by the Supreme Court of India on Nov 15, in which it held Fortis’ founders Malvinder Mohan Singh and Shivinder Mohan Singh guilty of contempt.

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