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The Asian Wall Street Journal
22nd August 2001

Malaysia Mining and Key Shareholder Quarrel Over Shelved Port Purchase

By LESLIE LOPEZ

Staff Reporter of THE WALL STREET JOURNAL

KUALA LUMPUR, Malaysia -- Malaysia Mining Corp. Bhd.'s decision to shelve the planned purchase of a port in Johor state has put the company's management on a collision course with a key shareholder, businessman Syed Mokhtar Al-Bukary.

MMC, once Malaysia's largest tin-mining company, is majority-owned by state investment fund Permodalan Nasional Bhd. But tension is increasing between MMC's management, led by Chief Executive Ibrahim Mehudin, and Tan Sri Syed Mokhtar, who is angling to take control of the company, according to people familiar with the situation.

MMC's board of directors decided last month to abort a plan to buy a 50.1% stake in port operator Pelabuhan Tanjung Pelepas Sdn. Bhd. for 1.64 billion ringgit ($431.6 million) from Seaport Terminal Sdn. Bhd., a private company controlled by Tan Sri Syed Mokhtar. MMC offered no explanation for scrapping the purchase and said it remains interested in buying a sizable stake in the new port, which is 30%-owned by Denmark-based Maersk Sealand International and is located just north of Singapore.

But bankers close to MMC say the board's decision hinged on potential legal problems. Under an agreement with Seaport Terminal, Maersk has the first option to purchase shares in Tanjung Pelepas should Seaport Terminal decide to sell them. But, according to people familiar with MMC, Maersk wasn't offered Seaport Terminal's shares before the Malaysian company proposed to sell them to MMC. That forced Tan Sri Ibrahim to recommend that the deal be canceled.

Flemming Ipsen, a senior Maersk executive in Singapore, confirmed that the Danish company has the first option to acquire Seaport Terminal's stake in Tanjung Pelepas. Asked whether the shares were offered to Maersk before being offered to MMC, Mr. Ipsen said, "I can't comment on that."

MMC's decision has strained ties between Tan Sri Ibrahim and Tan Sri Syed Mokhtar, who wants to make MMC the publicly listed flagship of his business empire. Tan Sri Syed Mokhtar already owns 19.9% of MMC through a privately held concern. The now-aborted transaction with Seaport Terminal, which was to be financed by a combination of new MMC shares and cash, would have raised Tan Sri Syed Mokhtar's equity in MMC to 43%, according to Malaysian bankers.

Tan Sri Ibrahim didn't respond to requests for comment, and Tan Sri Syed Mokhtar couldn't be reached to discuss the matter.

The confrontation at MMC is likely to give Tan Sri Syed Mokhtar -- a publicity-shy businessman who has cultivated close ties to Prime Minister Mahathir Mohamad in recent years -- a higher profile on Malaysia's corporate scene.

Tan Sri Syed Mokhtar began his career as a rice trader in the northern state of Kedah. Close associates say the businessman often holds his private investments through nominees and rarely takes an executive role in companies that he controls.

He acquired his 19.9% interest in MMC in September through a little-known private concern called Impian Teladan Sdn. Bhd., which purchased the stake from Permodalan Nasional for 499 million ringgit.

Tan Sri Syed Mokhtar's arrival as a shareholder immediately shook up MMC. The company first sold its core mining investments, including those in Australia, in deals that netted 708 million ringgit and increased MMC's cash reserves to 1.3 billion ringgit.

MMC then announced that it planned to acquire two companies indirectly linked to Tan Sri Syed Mokhtar. First, MMC paid 774 million ringgit for a 22.7% interest in listed independent power producer Malakoff Bhd. Late last year, MMC also disclosed its intention to buy a controlling stake in Tanjung Pelepas port from Tan Sri Syed Mokhtar's Seaport Terminal, in a deal that was to be completed by early August.

At the time, some securities analysts said MMC was paying a hefty premium for Tanjung Pelepas. But proponents of the purchase said the valuation was fair because Seaport Terminal had just tapped Maersk Sealand, the world's largest container shipping concern, as its partner in the port investment.

Maersk never disclosed how much it paid for its 30% interest in Tanjung Pelepas, but Malaysian bankers say the company, which also secured management rights for the port, paid 730 million ringgit for its stake.