This article first appeared in The Edge Malaysia Weekly on December 25, 2023 - December 31, 2023
There seemed to be no lack of drama in the local corporate sector as disputes between and within companies broke out. In some cases, conflicts between family members who are major shareholders became public.
Tunku Datuk Yaacob Khyra
Non-executive chairman of KNM Group Bhd
The highlights for KNM Group Bhd, despite being a Practice Note 17 company that struggled to pare its debts and cut its losses, are not its financials. Instead, an attempt by a group of shareholders with 10% or more of the financially stressed company to remove Yaacob in September thrust the company in the spotlight. Among the dissenting shareholders is German businessman Andreas Heeschen.
The interest in KNM is due to its crown jewel, German-based equipment manufacturer Borsig GmbH, which chalked up profits of €24.79 million in 2022.
Heeschen and parties acting in concert nominated seven new directors instead, including Johor royalty Tunku Kamariah Aminah Maimunah Iskandariah, sister of the current Johor Sultan Ibrahim Sultan Iskandar. Yaacob, who emerged as a substantial shareholder in KNM in 2021, himself is linked to the Negeri Sembilan royalty.
What ensued following the boardroom brawl were media statements, with each side championing a turnaround strategy for KNM. There was even a legal action by KNM against one of the directors proposed by Heeschen — Flavio Porro, who had served on the KNM board alongside Yaacob previously.
In the run-up to the extraordinary general meeting (EGM) on Oct 16, KNM’s share price saw a sharp increase.
What’s perplexing is that the EGM turned into a non-event as eight of nine KNM incumbent directors remained on board, including Yaacob. In a media statement later that day, Kamariah alleged that Heeschen’s vote was not counted in the resolution to remove Yaacob.
Although the EGM was uneventful, the price spike in KNM’s shares would have allowed many to take profit from the loss-making company.
The shareholder tussle aside, the going is getting tougher for KNM, which still has RM1.23 billion in borrowings. The KNM board has given itself until July next year to list Borsig and settle its debts, but it is still appealing to extend a restraining order against its creditors, and has yet to secure an extension of its Oct 31 deadline to submit a regularisation plan.
As Yaacob emerged a winner in the KNM shareholder tussle, he now needs to focus on the main issue — to continue fending off the company’s creditors. — By Adam Aziz
Datuk Iskandar Mizal Mahmood
Former managing director of MAHB
The office of MAHB’s CEO seems to be a revolving door for its top executives. Iskandar Mizal, who succeeded Datuk Mohd Shukrie Mohd Salleh in October 2021, was the third managing director to step down from the post in a span of five years since 2018.
His two-year contract was not extended. The change of guard came at a time when Kuala Lumpur International Airport (KLIA) is currently undertaking several major infrastructure projects, including the upgrading of the baggage handling system and the installation of the track transit system, besides the automated people mover or aerotrain system that has caused public backlash.
The award of the aerotrain replacement contract to Pestech International Bhd happened during Iskandar’s tenure, but it was terminated two months before he stepped down. It was also during his tenure that the group turned the corner in its financial year ended Dec 31, 2022, after two straight years of losses due to the pandemic.
Since taking the helm at MAHB, Iskandar Mizal had been under tremendous pressure to restore KLIA to its former position among the world’s top 10 airports. The breakdown of the aerotrain service at Terminal 1 of KLIA, however, sealed his fate. Some say he inherited the legacy issue, which included a delay in allocating capital expenditure to replace the 25-year-old aerotrain system, and that his predecessors should have replaced and upgraded the facilities at KLIA. The board of directors of MAHB is also accountable for the delays. Still, as head of MAHB, there was no running away from his responsibilities of ensuring the smooth functioning of the airport.
While there are many stories floating around as to why the board did not extend Iskandar Mizal’s tenure as managing director, perhaps there should have been some consideration placed on the need for continuity of leadership. For now, its group chief financial officer Mohamed Rastam Shahrom is the acting group CEO.
Lee Chun Fai
CEO and managing director of IJM Corp
Lee was appointed CEO and managing director of IJM Corp Bhd in April. Six months later, he orchestrated what could turn out to be a killing for IJM as it seeks to take up a 44.83% stake in Pestech at 15.5 sen per share. This would be a 47.46% discount to the market price on the day the deal was announced and less than 30% of Pestech’s net assets per share of 53 sen as at end-March this year.
IJM’s entry would also strengthen Pestech’s case in MAHB’s termination of its RM742.85 million aerotrain contract.
While the acquisition of a stake in Pestech looks good on paper, sceptics question whether it is indeed a sweetheart deal for IJM, in view of Pestech’s chequered past and the legal disputes it is involved in.
Nevertheless, with IJM steering things, Pestech could be a different animal and should be able to complete the aerotrain project with ease.
Pestech shareholders agreed to IJM’s buy into the company at an EGM on Oct 27.
IJM entered into a subscription agreement for the stake in Pestech in July, with the deal to be concluded in three months. In mid-October, a month-long extension was sought and, in November, an extension of seven months — or an additional three months (to Feb 23 next year) — from the date of the subscription agreement in July was obtained.
In its announcement to Bursa Malaysia, Pestech says the reason for the extension is that it “requires more time to fulfil the said conditions precedent”.
Does this mean, though, that it will be status quo with the aerotrain project until February next year?
Paul Lim Pay Chuan
Managing director of Pestech International Bhd
Paul Lim Pay Chuan could hardly step out of the limelight in 2023. The year did not start off well for Lim, who was charged by the Malaysian Anti-Corruption Commission (MACC) in January with abetment in allegedly misappropriating the assets of a subsidiary, Pestech Technology Sdn Bhd, amounting to RM10.6 million, together with Pestech International Bhd (Pestech) chairman Lim Ah Hock. The subsidiary’s CEO G Paismanathan was charged in November 2022.
All three claimed trial. In July, the court dismissed the charges against them.
MACC’s charges resulted in serious repercussions on Pestech, which became financially stressed as banks pulled back credit lines.
While Lim was looking for ways to resolve Pestech’s financial woes, the KLIA aerotrain broke down in March. Being in charge of the contractor of the RM742.85 million aerotrain replacement project, Lim was inevitably thrust into the spotlight, along with the board and senior management of MAHB.
Still, he managed to bring construction giant IJM Corp Bhd on board to inject RM124 million via a subscription for new Pestech shares in July. If the share purchase agreement is executed by Feb 23, 2024, IJM will be the single-largest shareholder, with a 44.83% stake. The fresh equity will help recapitalise Pestech, enabling it to carry on with the projects secured.
Just when Lim thought he could breathe a sigh of relief, MAHB terminated the aerotrain replacement with Pestech, claiming that the latter was too far behind schedule and failed to meet milestones. Lim disagreed with the claim, saying that Pestech had discussions with the airport operator about a different work programme.
FOOD FIGHT IN THE SKY
Malaysia Airlines Bhd got off to a chaotic start in September as the national carrier ended its long-standing in-flight catering partnership with Brahim’s Food Services Sdn Bhd and switched to new food and beverage providers. Flights were delayed and passengers complained about the meals served on board during the transition.
Datuk Captain Izham Ismail
Group managing director of Malaysia Aviation Group Bhd
After the success of Malaysia Aviation Group Bhd’s (MAG) restructuring in February 2021 that saw the group shave off more than RM15 billion in debt from 75 creditors, Izham had set his sights on renegotiating the remaining contracts that were previously excluded from the exercise. This included an inherited in-flight catering partnership with Brahim’s Food Services Sdn Bhd (BFS), where Izham had expressed his disappointment over the poor-quality meals supplied by BFS and revealed that the contract terms were “lopsided”.
Fast-forward to Aug 31 this year. After two decades of partnership, MAG’s wholly-owned unit Malaysia Airlines Bhd (MAB) made the bold decision to end its contract with BFS and work with multiple food and beverage companies to provide in-flight meals. While the move was seen as positive as the national airline now had more negotiating power, it did not come without challenges as passengers criticised MAB for its poor organisation and handling of the transition as flights were delayed and pre-packed food was served instead of freshly prepared in-flight meals.
Izham reportedly said MAG had consciously chosen to end the partnership with BFS following months of negotiations for a contract renewal, but both sides failed to reach an amicable agreement.
“We are really aware of what will happen [when we terminate the catering contract with BFS] and of the feedback [we will receive] from passengers and stakeholders, but if we don’t have the courage to take on legacy contracts, then why do you need me as a CEO?” he had said.
Since mid-November, MAB has fully restored its in-flight meal services on routes affected by the transition. Still, it remains to be seen whether or not MAG will proceed to buy out Brahim’s Holdings Bhd’s (BHB) stake in BFS. The airline currently holds a 30% stake in BFS, while BHB has a controlling 70% stake.
One thing MAG has going for it is that it is on track to turn profitable this year. Its cash balance stood at RM5.2 billion as at end-October. — By Kang Siew Li
Datuk Seri Ibrahim Ahmad
Executive chairman of Brahim’s Holdings Bhd
Brahim’s Holdings Bhd (BHB) appeared to have the upper hand as talks between its 70%-owned subsidiary Brahim’s Food Services Sdn Bhd (BFS) — which operates the country’s largest in-flight catering kitchen and dominates the local in-flight catering sector — and Malaysia Aviation Group Bhd (MAG) got underway for their impending contract renewal.
But in a move that surprised many, MAG terminated its long-standing contract with BFS upon its expiry on Aug 31.
Controlled by its founder Datuk Seri Ibrahim Ahmad, BHB has been the primary catering provider of Malaysia Airlines Bhd (MAB) since 2003. Ibrahim had previously expressed his disappointment that BHB got the raw end of a settlement deal with MAB’s controlling shareholder Khazanah Nasional Bhd under the Malaysia Airlines Recovery Plan in 2015, which saw the flag carrier ending its 25-year exclusive supply contract with BFS and slashing its catering bill by 20% to 25%.
Thus, a new clause in the new contract extension — which would give MAG, the parent company of MAB, the contractual right to terminate the agreement for any reason — created more discord between BHB and the aviation group. Ibrahim reportedly said he would agree to the inclusion of the new clause provided that the compensation terms were fair. He had described “fair” compensation as one that covers the loss of BFS’ future earnings for the remaining period of the contract.
In the aftermath of the termination, Ibrahim had conceded that without MAB, BHB’s turnaround plans would be affected as the airline contributed almost 50% to BFS’ revenue. BFS, in turn, is the largest contributor to BHB’s top line, contributing about 90% to its total revenue. BHB has been making losses since 2014.
All eyes are now on how Ibrahim will lift BHB from its doldrums, as he had previously said BHB was ready to sell its 70% stake in BFS and has been approached by “quite a number of companies”. — By Kang Siew Li
Datuk Seri Stanley Thai
Executive chairman and co-founder of Supermax Corp Bhd
Datuk Wira Cheryl Tan Bee Geok
Co-founder of Supermax Corp Bhd
After various public statements made by members of Supermax’s founder family and the appointment of four new independent non-executive directors (INEDs), it remains to be seen if the family feud is finally over. The appointment of the four INEDs on Dec 18 followed comments made by Stanley’s wife, Cheryl, in the press. The duo are the glove manufacturer’s co-founders, collectively holding a 38.86% stake.
The dispute within the group surfaced in April this year when Cecile Jaclyn — the couple’s daughter — resigned as non-executive director as she claimed to have experienced “bullying and silencing” from other board members, including her father, while trying to uphold her fiduciary duties.
The trigger point was that Stanley was allegedly trying to remove her from the board following her opposition to his proposed purchase of a new aircraft for US$47.39 million (RM210.32 million).
Her allegations were later dismissed by Supermax.
Another daughter, Aurelia Joie, was also unhappy with the aircraft deal, having filed an injunction application to stop Stanley and three others from holding a nominee remuneration committee meeting to consider whether to allow Aurelia to continue as director of Supermax’s subsidiary Maxter Glove Manufacturing Sdn Bhd.
In a Dec 7 media report, Cheryl said that the aircraft purchase had caused continued losses in Supermax while calling for a “balanced board with more independent directors with the right mindset to provide checks and balances”.
However, her remarks prompted Supermax to warn that shareholders without any management role or position in the board have no authority to make any official statement on its behalf.
While its peers like Hartalega Holdings Bhd and Kossan Rubber Industries Bhd returned to profitability, Supermax continued to bleed, posting a net loss of RM2.05 million in the July to September 2023 quarter.
It remained cash-rich, with a net cash of RM1.7 billion as at Sept 30, 2023, albeit lower than the RM2 billion it had at end-June 2023. — By Lee Weng Khuen
Datuk Seri Sulaiman Abdul Rahman Abdul Taib
Group managing director of Cahya Mata Sarawak Bhd
Toh Puan Raghad Kurdi Taib
Sarawak governor’s wife
The Taib family is embroiled in a controversial legal battle over the ownership of shares in the Sarawak conglomerate, Cahya Mata Sarawak Bhd (CMS). In June this year, the media reported that Sulaiman had filed a legal challenge against his stepmother Raghad over the transfer of shares made by his father, governor Tun Abdul Taib Mahmud, to her.
Sources say the shares under dispute constitute a 10.33% stake in CMS, which originally belonged to Sulaiman’s late mother, Puan Sri Laila Taib. As at March 31, 2023, the stake formed the second-largest block in the group, after Majaharta Sdn Bhd’s 12.55%.
In September, Sulaiman filed an injunction to stop the share transfer with the Kuching High Court, naming Raghad and RHB Investment Bank Bhd as defendants, according to a Bernama report. Sulaiman challenged the authenticity of Taib Mahmud’s signature on transfer-related documents in court and attempted to submit new affidavits.
However, Raghad’s counsel Shankar Ram refuted the challenge due to a lack of proper notice. In a surprising escalation in November, Sulaiman — acting together with his brother Datuk Seri Mahmud Abu Bekir Taib — named their father as a third defendant in the case even as the defence insisted the shares had been rightfully transferred to Raghad.
Even as the case unfolds, the issue of personally serving the application on Taib needed to be resolved. Shankar Ram referenced specific legal protections potentially shielding the governor from litigation, according to media reports.
The uncertainty rattles the family, specifically Taib’s daughters and Abu Bekir, who collectively hold about 13% of CMS shares. The legal quagmire casts doubt over the family’s 23% equity in CMS (including the late Laila’s 10.33% stake in CMS), potentially impacting the group’s future.
Meanwhile, Norway’s Government Pension Fund Global, overseen by Norges Bank, acquired a 5.03% stake of CMS shares in September. Yet, the ongoing legal conflict demands attention as the potential shift in ownership could influence the strategic decisions of the conglomerate, particularly in the evolving environment within Sarawak where CMS dominates the road concessionaire and cement markets. — By Isabelle Francis
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