KUALA LUMPUR: Datuk Mokhzani Mahathir says the proposed acquisition by Kencana Capital Sdn Bhd of a stake in Yinson Holdings Bhd does not conflict with his position as a major shareholder in SapuraKencana Petroleum Bhd.

“There is no conflict of interest. Why would there be a conflict of interest?” he said after speaking at the Perdana Leadership Foundation CEO Forum 2013 yesterday.

“No, I have not heard of any report saying there is a conflict of interest,” said Mokhzani who owns Kencana Capital together with his long-time business partner Yeow Kheng Chew.

Kencana Capital has proposed to acquire a 15% stake in rising oil and gas company Yinson. The entry of Kencana Capital is subject to Yinson taking over Oslo-listed oil and gas company Fred Olsen Production ASA (FOP).

The Norwegian company has a fleet of floating production, storage and offloading (FPSO) vessels with long-term charters.  

Questions about a potential conflict of interest came about because Mokhzani, the son of former prime minister Tun Dr Mahathir Mohamad, is also the executive vice-chairman of oil and gas (O&G) support services provider SapuraKencana Petroleum Bhd.

He has an interest of about 16% in SapuraKencana, the second largest shareholder after Tan Sri Shahril Shamsuddin.

Mokhzani’s interest will be reduced to about 12% after an ongoing corporate exercise in SapuraKencana.

On May 31, 2013, Yinson proposed to issue and place out new shares to Kencana Capital at RM2.82 each, to be paid in cash. It would be about 15% of Yinson’s enlarged capital.

Kenanga Research described Kencana Capital’s entry into Yinson as a game changer for the small oil and gas company that generally operates in Vietnam.

The proposed acquisition of FOP will change the landscape for Yinson as it will have a global presence and become the sixth largest player in the FPSO market of the oil and gas industry.

After Kencana Capital’s entry into Yinson, the stock became a favourite among investors. It rose 52% to RM4.76 from RM3.13 on May 28 before settling at RM4.75 yesterday.

Yinson will use the proceeds from the placement to Kencana Capital for the acquisition of FOP, which will cost the company RM576 million.

The placement to Kencana Capital will raise RM106 million. Yinson is also undertaking a private placement of 10% of the company which will bring in another RM56 million.

The company has secured funding from three banks to the tune of RM400 million to complete the acquisition that would involve taking FOP private.

Yinson executive director Lim Chern Yuan was recently quoted in news reports as saying the investment by Kencana Capital is unrelated to SapuraKencana.

“Mokhzani has been in O&G for a long time now and he likes the industry. There is no conflict of interest between SapuraKencana and Yinson.”

“We are in one part of the business that SapuraKencana does not have,” Chern Yuan was quoted as saying.

SapuraKencana is Malaysia’s biggest O&G service provider and contractor. It provides a range of services from offshore installation of pipes, to hook-up and commissioning and provision of accommodation and work barges.

It is also a contractor for Petroliam Nasional Bhd in developing marginal oil fields.

Yinson has a floating, storage and offloading (FSO) vessel operating in Vietnam. After the proposed acquisition of FOP, it will have five FPSO’s at its disposal.

This article first appeared in The Edge Financial Daily, on JUNE 19, 2013.