The settlement of the family feud involving two factions of the Tan family that controls the Tan Chong group of companies is as intriguing as the fallout between some members of the family that eventually came out in the open.

Only last month, the faction aligned to Datuk Tan Kim Hor got a major breakthrough in its fight against the Datuk Tan Heng Chew faction when the High Court decided that an application to seek the dissolution of Tan Chong Consolidated Sdn Bhd (TCC) could be heard.

The Kim Hor faction filed the petition in 2001 as it was at loggerheads with the camp headed by Heng Chew and wanted to break up TCC in accordance with the shareholdings of the respective families.

Then, the Kim Hor faction owned 45% of TCC while the Heng Chew side held the rest. Kim Hor is the co-founder of the Tan Chong group with the late Tan Sri Tan Yuet Foh, the father of Heng Chew.

The group found fame by being the importer and assembler of Nissan cars in Malaysia and Singapore. It is a franchise still being held firmly by the group even though there was speculation at one time — at the height of the family crisis in 2001/02 — that principal Nissan was looking to drive its operations here.

The crux of the family feud was this: the bloc aligned to Kim Hor felt that it was being marginalised by the Heng Chew side in the management of the companies under the Tan Chong group in Malaysia.

The listed companies in Malaysia are Tan Chong Motor Holdings Bhd (TCM), APM Automotive Holdings Bhd and Warisan TC Holdings Bhd. Another company, Tan Chong International Ltd (TCIL), is principally listed in Hong Kong, with a secondary listing in Singapore.

Events came to a head between Datuk Tan Boon Pun and Datuk Tan Hoe Pin, the third and fourth sons of Kim Hor, who were part of the management team of the Malaysian operations, and Heng Chew, the eldest son of Yuet Foh.

Heng Chew is currently the executive deputy chairman of the flagship company, TCM, and the single-largest shareholder in TCC.

Boon Pun was known as a key figure in the motor assembly activities while Hoe Pin was the marketing person in charge of ensuring the sales of the cars. Boon Pun was also primarily involved in developing Warisan TC, which is involved in non-automotive businesses, such as travel, making lingerie and distributor for Shisheido.

Boon Pun was a board member of Warisan TC and was voted out while his father’s term as a director in TCM and the group of companies was not renewed.

What prompted the settlement
After the court ruled in favour of the Kim Hor faction to hear the application for the dissolution of TCC in the middle of last month, the expectation was that the thick affidavits and counter-affidavits filed by both factions would finally come out in the open.

The affidavits contained juicy material fit for a movie on how family-owned companies are managed and how differing views and varying influence can lead to boardroom battles and finally a break-up.

But no, the Tan family was not about to have any of that. At least, this is what can be deduced from the settlement between the two camps that came about just weeks after the court’s decision.

But why did the Kim Hor side accept the settlement? If its shareholding in TCC was 45%, as stated in previous court documents, it stood a good chance of getting almost half of what was in the Tan Chong stable.

Or was it because it had lost the battle even before the court decided on the application?

It has been reported that a few months ago, the Heng Chew clique increased its effective interest in TCC after some members of the Kim Hor side sold out. An unconfirmed report has it that a 20% block in TCC was sold to the Heng Chew team, hence making him a 75% shareholder in TCC.

“With only a 25% stake, the Kim Hor group probably felt it did not stand any chance. Also, probably both sides did not want to go to court where everything will be heard in public,” says an official close to the family.

So far, none of the Tan Chong family members has denied that there has been a change in the shareholding of TCC. The members or their lawyers could not be contacted for clarification.

Officials close to the family do not discount the possibility that the shares in TCC may have been sold to Heng Chew. Some say not all the sons of Kim Hor were agreeable to a legal suit being filed to seek the dissolution of TCC.

“Even when the case went to court in 2001, not all members of the Kim Hor faction were agreeable to it. The family members from the Singapore side, particularly, were not in favour of taking the case to court,” says a source.

Based on documents obtained, Kim Hor has seven sons. The eldest, Tan Kheng Leong, and the second, Tan Kang Leong, are based in Singapore while the rest are in Malaysia.

According to the latest records, Kheng Leong and Kang Leong own 11.25% and 6.35% in TCC respectively.

Also, the relationship between Kim Hor’s sons in Singapore and the Heng Chew wing has been cordial even when both sides were at loggerheads. While Boon Pun and Hoe Pin were removed from their positions in all the companies in Malaysia, Kheng Leong is an executive director of TCIL.

Did Kim Hor lose out?
Next week, the petition to hear the dissolution of TCC will come up for hearing. In accordance with the settlement, the petition will be withdrawn. The withdrawal was stated in TCIL’s announcement to the Singapore Exchange.

The settlement itself is not a straightforward matter. TCC would retain its effective interest of about 33% in the listed companies and would release the rest progressively to exiting minority shareholders of the holding company over five years.

Currently, TCC directly controls a 46.51% stake in TCM and 45.34% in TCIL. TCC and its wholly-owned subsidiary Parasand Ltd jointly hold 43.6% in APM Automotive and 43.53% in Warisan TC.

The total market capitalisation of the Malaysian listed companies is about RM1.6 billion while TCIL has a capitalisation of HK$3 billion (RM1.36 billion). Hence, based on market prices as of last week, the value of TCC is about RM1.3 billion.

After the progressive distribution of shares in the listed companies, TCC would end up holding 33.92% in TCM, 31.75% in Warisan TC and 31.79% in APM Automotive. The interest in TCIL would be at least 33%.
This means the exiting minority shareholders would get about 12.59% in TCM, 11.78% in Warisan TC, 11.81% in APM Automotive and about 12.34% in TCIL. Collectively, the value of these stakes is worth just below RM350 million based on last Friday’s market capitalisation.

In terms of value, the shares that the exiting Kim Hor party receives would be equal to market value. But the Kim Hor side will not benefit significantly as it will not be in the driving seat of the Tan Chong group, which commands a significant brand presence.

“There really is not much of a choice for the exiting minorities of TCC. If it is really true that even some within the Kim Hor group had sold out, the chances of seeking a dissolution are less compared with nine years ago,” says a merchant banker.

Who the exiting minority shareholders of TCC are has not been made public.

But speculation is rife that they are likely the sons of Kim Hor who are based in Malaysia. In fact, Boon Pun and Hoe Pin, with their father Kim Hor, have gone on to set up their own business and control listed company Wawasan TKH Holdings Bhd.

Wawasan TKH is primarily involved in the manufacture and trade of disposable foodware and the mining and processing of refined kaolin that is used to produce tableware. The company is also involved in producing automotive parts in addition to providing automotive sales and services.

But the amount of business that Wawasan TKH generates is nowhere near the volume produced by the companies in the Tan Chong group. For FY2008 ended Dec 31, Wawasan TKH registered a loss after tax of RM24.37 million on a revenue of RM91.59 million.

Meanwhile, the settlement does not completely rule out the possibility of the exiting minorities or the Kim Hor side making a comeback in some of the companies in the Tan Chong group.

Some of them hold direct stakes in the listed companies, but it will probably be a long time before something like that happens because with the latest development, the Heng Chew camp has entrenched itself firmly at the helm of the group.

After nine years, Heng Chew has worn out the opposing camp. Apart from having a 55% advantage in TCC, his trump card was not to sever ties with all members of the Kim Hor faction.

By keeping the channels open, he managed to increase his stake in TCC, which was probably the tie-breaker in this long-drawn-out family feud.

This article appeared in Corporate page of The Edge Malaysia, Issue 761, June 29-July 5, 2009