New twist to E&O takeover

KUALA LUMPUR: In a surprise move, ECM Libra Financial Group Bhd has proposed the nomination of two lawyers to Eastern & Oriental Bhd’s (E&O) board. ECM Libra has emerged as a substantial shareholder of E&O in recent months.

One of the two lawyers is a director of ECM Libra and the other a director of TA Enterprise Bhd.

E&O said in a filing with Bursa Malaysia that on Sept 14 it received a notice of intention to nominate Mahadzir Azizan and Leong Kam Weng to its board. The notice was sent by ECML Nominees (Tempatan) Sdn Bhd-Avenue Capital Resources Bhd, ECML Nominees (Tempatan) Sdn Bhd-Libra Invest Bhd on behalf of ECM Libra Foundation.

The announcement came about a week before E&O’s AGM on Sept 30.

This is seen by some parties as an attempt to gauge the support of E&O’s minority shareholders, many of whom are not happy with the recent disposal of a 30% stake to Sime Darby Bhd by three major shareholders, which did not include ECM Libra. The minorities felt the deal should have triggered a mandatory general offer for the remaining shares.

It is unclear if the move indicates the start of a boardroom battle for the Penang-focused property developer.

ECM Libra was seen as the wild card in this deal and a force to be reckoned with as it emerged as a substantial shareholder at the end of April with 5.12% equity interest held by its investment funds. The stake was upped to 6.25% last month  and 6.3% just this week. However, the size of the stake held by ECM Libra Foundation is not known.

Prior to the Sime Darby purchase, E&O had already been rumoured to be a takeover target. SP Setia Bhd was seen as a potential candidate — which it later denied.

Since the deal was struck, there has been talk of counter-bids by other parties interested in E&O, and in particular its landbank and reclamation rights in Seri Tanjung Pinang, Penang.

To recap, Sime Darby acquired a 30% stake in E&O from three of its substantial shareholders — E&O managing director Datuk Terry Tham, Tan Sri Wan Azmi Wan Hamzah and GK Goh Holdings of Singapore — on Sept  9 for RM766 million or RM2.30 a share, a 59% premium to the then market price.

As the government-linked conglomerate only acquired a 30% stake, it did not trigger a mandatory general offer.

Tham sold a 12.2% stake to Sime Darby while Wan Azmi and GK Goh disposed of 11.9% and 9.5% respectively. After the sale, Tham retained 5.1%, while Wan Azmi held 2.9% and GK Goh, 3.5%. This would make ECM Libra the second largest shareholder in E&O after Sime Darby and ahead of Tham, who remains the managing director.

According to their CVs, Mahadzir is a barrister-at-law by profession and a director of ECM Libra Financial Group, ECM Libra Investment Bank Bhd, Libra Invest Bhd and several other companies. It added that he has been involved in “major aspects of corporate transactions including land acquisitions, mergers and acquisitions, corporate reorganisations and takeovers, listing and de-listing, joint ventures and corporate reconstructions and capital reductions”.

Leong, a certified practising accountant of CPA Australia and a chartered accountant of the Malaysian Institute of Accountants was in legal practice for three years before he joined TA Enterprise as the group legal adviser. He went on to become the CEO of TA Securities Bhd in 1998 and he is now a partner in a law firm, Iza, Ng, Yeoh & Kit and sits on the board of directors and audit committee of TA Enterprise. He is “well-versed in corporate and securities laws, mergers and acquisitions and corporate governance matters”.

One of the many interesting factors in this is that Sime Darby, which is also expected to seek two or three board seats, has not yet put forward its own candidates yet. And while neither Sime Darby nor the three directors who sold to it  are expected to vote in favour of this resolution, it will be interesting to see who does.

“It’s a tactical play to test the waters. ECM Libra just wants to see how much support it already has on the board, or at least, how many of the other substantial shareholders are angry enough with Sime Darby and the three directors, to side against them,” said one market observer.

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