This article first appeared in The Edge Malaysia Weekly on June 19, 2023 - June 25, 2023
LOW-profile tycoon Tan Sri Syed Mokhtar Albukhary is understood to be making another attempt to take over FGV Holdings Bhd’s 51%-owned sugar refinery unit MSM Malaysia Holdings Bhd.
A source tells The Edge that Syed Mokhtar had submitted a proposal to the Ministry of Finance (MoF) in May. “He wants to take over MSM, and the matter is at the proposal stage with MoF,” says the source.
The Federal Land Development Authority (Felda) is FGV’s largest shareholder, owning a 81.9% stake, while the Minister of Finance Inc (MoF Inc) holds one golden share in the publicly listed company.
MSM is one of two large sugar refiners in Malaysia. The other is Central Sugars Refinery Sdn Bhd (CSR), which is under Syed Mokhtar’s control through his private vehicle Perspective Lane (M) Sdn Bhd. Perspective Lane also owns Padiberas Nasional Bhd (Bernas) — the country’s sole rice distributor.
Some quarters are unhappy that Syed Mokhtar would even make an attempt at such a proposal, which would see the businessman monopolising the country’s refined sugar industry.
If Syed Mokhtar is successful with his takeover bid, he would be monopolising two key commodities in the country — the sugar industry and the rice distribution sector.
Initial channel checks show that FGV is not too keen on the proposal, but there may be pressure induced.
The move by Syed Mokhtar — who has an already sprawling empire of businesses from transport to power — has raised eyebrows, given that it has come at a time when the incumbent government is making efforts to break monopolies.
Notably, Prime Minister Datuk Seri Anwar Ibrahim had in May announced that, to provide a more competitive and equitable playing field for industry players, the administration would be looking to review companies that have been enjoying monopolies in the past.
Sources say Syed Mokhtar could easily get funding from financial institutions for his bid to take over MSM. Some also point out that he could use his clout to sway things in his favour.
It has been Syed Mokhtar’s modus operandi over the years to inject his existing assets into a company in exchange for shares in order to gain control of it.
Industry observers believe Syed Mokhtar may want to inject CSR into MSM to obtain a stake in the company and, thereafter, inject more assets into the merged entity and gain control of the company and the prime land in Shah Alam that CSR’s plant occupies.
“CSR’s Shah Alam plant sits on land that is worth over RM1 billion in gross development value,” says a source.
In 2000, Syed Mokhtar acquired a 19.9% stake in MMC Corp Bhd from government-linked investment company Permodalan Nasional Bhd.
Two years later, MMC acquired 50% of Port of Tanjung Pelepas Sdn Bhd from Syed Mokhtar’s private company Seaport Terminal (Johore) Sdn Bhd for RM1.6 billion, which was satisfied by a combination of RM750 million in cash and 285.3 million in new MMC shares at RM3 apiece. The move raised Seaport Terminal’s stake in MMC to 44.9%.
In the case of DRB-Hicom Bhd, the tycoon acquired a 15.8% block in the company from the family of the late Tan Sri Yahya Ahmad, edging out the late Tan Sri S M Nasimuddin S M Amin of the Naza group in a bidding war in which Syed Mokhtar outbid Nasimuddin’s offer by 10 sen at RM3.60 a share.
Syed Mokhtar then tightened his grip on DRB-Hicom by injecting his 70% stake in Bank Muamalat Bhd into the company, in a deal valued at RM1.01 billion that was satisfied in shares.
Besides Bank Muamalat, he also injected another company that handled the operations and maintenance work for the Tanjung Bin power plant in Johor for RM720 million. Tanjung Bin is controlled by Malakoff Corp Bhd, which is in turn controlled by Syed Mokhtar.
As a result, Syed Mokhtar’s stake in DRB-Hicom rose from 15.8% to more than 50%, giving him control over the company. He now has a 55.9% in DRB-Hicom through Etika Strategi Sdn Bhd.
MSM suffered a net loss of RM178.1 million in its financial year ended Dec 31, 2022, on high input cost. Notably, raw sugar makes up 80% of its cost. A year earlier, it had recorded a net profit of RM125.35 million. For the first quarter ended March 31, 2023, the sugar refiner continues to be in loss-making, with net loss amounting to RM35.88 million, wider than the RM27.68 million recorded a year earlier.
On the other hand, company search showed that CSR has been profitable in the last five financial years. For the financial year ended Dec 31, 2021, CSR made a net profit of RM120.88 million.
In the past, Syed Mokhtar has made similar attempts for MSM. In 2018, the tycoon was said to have put in a proposal involving a merger of MSM and CSR. The proposal entailed a special-purpose vehicle and the injection of both businesses, where Syed Mokhtar would operate it.
Then, in 2020, he had expressed interest in FGV via an injection of plantation assets into the company for share consideration, which would see him gaining control of MSM through FGV’s stake in MSM.
Will the latest proposal gain traction this time?
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