Frankly Speaking

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Kuok no longer ‘Sugar King’ in MalaysiaFor a few years now, speculation has been rife that Robert Kuok will eventually give up his control over the sugar refinery business in Malaysia.Last week it came true. In a move that is not entirely surprising, PPB Group Bhd, Kuok’s flagship company controlled by Kuok, last Friday announced a string of disposals to Felda Global Ventures Holdings Sdn Bhd (Felda).It sold its flagship sugar refinery in Malaysia, Malayan Sugar Manufacturing Company Bhd (MSM), for RM1.22 billion cash. The group is also disposing of its 50% shareholding in Kilang Gula Felda Perlis Sdn Bhd, which does sugar cane milling and raw sugar refining, and a land parcel in Chuping, Perlis.MSM supplies 50% of the domestic market. The other major refinery is Central Sugar Refinery Sdn Bhd (CSR) based in Shah Alam. CSR is held through Tradewinds (M) Bhd, where the Kuok Group through Grenfell Holdings Sdn Bhd has a 20% stake.The Kuok Group is also proposing to sell its 20% interest in Tradewinds to Felda at RM3.50 per share or RM207.53 million cash.Following the asset sales, Kuok is no longer the Sugar King in Malaysia.What’s telling is the way the Kuok Group exited its sugar refinery business. Why did he exit the sugar business in Malaysia while still controlling an extensive network of sugar refineries and a distribution network outside Malaysia? What has prompted him to take such a decision?The disposal came just two days after Tradewinds acquired Padiberas Nasional Bhd (Bernas). Did the entire exercise, which will see Tradewinds’ gearing balloon, have anything to do with the deal?Tradewinds’ acquisition of Bernas is a related party transaction, where major shareholder Tan Sri Syed Mokhtar Al-Bukhary has interests in both companies.Tradewinds chairman Datuk Syed Abdul Jaabar Syed Hassan had declared after a shareholders’ meeting to deliberate on Tradewinds’ acquisition of Bernas last Wednesday that the deal was approved by all, including the Kuok Group.Was that really the case?If Kuok liked the deal, why did they exit just two days after it was approved by shareholders? Did the Kuok Group vote for or against the deal? Or did it abstain as reported by The Edge?Also, a few weeks ago, it was reported that Felda would acquire Kuok’s interest in Tradewinds. This was denied by Grenfell.In a reply to Bursa Malaysia on Sept 2, Tradewinds said it had been informed by Grenfell that there was no offer made nor detailed negotiations entered into with regard to the subject matter at that juncture.Now that a deal has been announced, was somebody not telling the entire story then? Were there really no negotiations between the two parties two months ago?PPB Group will receive RM1.29 billion cash while Grenfell will get RM207.53 million for its interest in Tradewinds. The quantum is big but it does not mean that the PPB Group is financially stressed and needs to hive off assets to raise money. It is also unlikely that the country’s richest tycoon needs the cash. Kuok is reported to be worth US$9 billion (RM30.7 billion).In the announcement to Bursa, PPB Group says the rationale behind the disposals is that the group will be able to realise its investments at a “substantial gain”.  No doubt the Kuok group has made a substantial gain. But the assets are hard to come by and generate a steady income.So, why dispose of them? Perhaps the value was right and the Kuok Group was not comfortable with its sugar refining business in Malaysia.Nevertheless, the big winner here is Syed Mokhtar, who is now the Sugar King of Malaysia.An adviser must only adviseThe role of an adviser is merely to provide advice. Whether the advice is taken by shareholders and management of the company is another matter.In the case of Proton Holdings Bhd, the adviser has considerable influence over the national automotive company. So, when he says that Proton is not for sale, this is a strong indicator to “predators” to stay away from the asset-rich company.It is sad that while several good names have approached Proton, some of the others going after the national automaker do not really add any value to the company. In fact, many are looking to take over the company with their own ailing vehicles to survive the over-capacity in the car assembly business.It is no secret that there are a few influential groups that are after Khazanah Nasional Bhd’s 43% controlling interest in Proton. And it is no coincidence that Tun Dr Mahathir Mohamad has broached the subject in his blog. The message that Proton is not for sale cannot be any clearer now.While in some ways it is good for an adviser such as Dr Mahathir to come out strongly to state his stand on Proton, on the flip side, it leaves many wondering who is really calling the shots in Proton.Already there is a perception that when it comes to Proton, Khazanah does not seem to have any say in matters regarding the sale of its stake. This was obvious when a deal for Volkswagen to buy a stake in the national automobile company was not approved by the Cabinet at the last minute.While Dr Mahathir remains a respected former prime minister and statesman, he should know better than to make such statements in public. A better way would be for him to put across his views to the major shareholder, which is Khazanah. And any opinion on the sale of its stake in Proton should come from Khazanah.After all, if Proton falters, it is Khazanah that will have to bear the financial risk and losses. This article appeared in Corporate page of The Edge Malaysia, Issue 779, Nov 2-8, 2009