Doing battle: Case studies

Malaysian Business, May 1, 2004 by Clarence Y K Ngui

CASE NO. 1: TAN CHONG MOTOR HOLDINGS BHD (2001 - )

FAST becoming a classic case study of a family-based boardroom tussle in

Malaysia, the Tan Chong family squabble has seen numerous twists and

turns: from the democratic voting process at an annual general meeting to

the high court hearings. Yet, to date, an amicable solution between uncle

Datuk Tan Kim Hor and nephew Datuk Tan Heng Chew seems as far off as ever.

The fight at Tan Chong took a respite in 2002 when Kim Hor and his

children were removed as directors from Tan Chong's listed companies as

well as some private subsidiaries. However, Kim Hor is still chairman of

the Hong Kong-listed Tan Chong International Co Ltd.

The various court verdicts have not seemed to help, though the group's

business, notably its Nissan automobile franchise, have gone on as usual.

However, in April this year, Japan's Nissan Motor Co Ltd indicated its

desire to either sell off its 5% stake in Tan Chong and wash its hands off

the whole affair, or increase its control of the company to at least 40%.

With that development, it would seem the family tussle has come to a

head. Will it spell the end of the Tan Chong automobile business? Will the

Tans go the way of the Phornprapha family of Siam Motors Co Ltd, which

lost its Nissan franchise after a family squabble?

CASE NO. 2: KFC HOLDINGS (M) BHD (1984-2000)

BATTLE scars are common in KFC Holdings. Its corporate history since

1984 tells a colourful story of corporate raiders, disenfranchised

directors and vicious boardroom battles. Perhaps, KFC's strong cash flow

and its dominant position in the local fast food industry make it an

attractive prey for corporate raiders.

Indeed, as one of the nation's most highly publicised and protracted

corporate battles, the tussle at KFC Holdings, especially in 1999 and

2000, was not only as hot and spicy as its chicken servings, but also

rather ugly. It was reported that opposing personalities even resorted to

hiring bodyguards after receiving personal threats.

Tracing its history to the 1980s and 1990s sees a string of events such

as that in 1984, when the late Loo Cheng Ghee, KFC's first Malaysian

franchise-holder, engaged in a battle of words with the then Kuala Lumpur

Commodities Exchange over an alleged attempt to corner the crude palm oil

market.

In the 1990s, various attempts were made by Malayan United Industries

Bhd (MUI) and the late Tan Sri Loy Hean Heong of MBf Finance Bhd to

acquire KFC. Both failed.

In the 1990s too, there were tussles between two major shareholders,

Datuk Ishak Ismail and the Lau brothers of Leong Hup Holdings Bhd. The

fight lasted from 1992 to 1995, with the Laus exiting and selling their

stake.

But the battle royale was to be between Ishak and Datuk Annuar Senawi

that began in 2000. Well-known personalities in their own right, the fight

began when Ishak, a majority shareholder of Idris Hydraulic Bhd (then a

major shareholder of KFC) lost control of Idris. Annuar then emerged with

a 69.7% stake in Idris. From there, the KFC saga spilt over to related

companies such as Prime Utilities Bhd.

CASE NO. 3: MAGNUM CORPORATION BHD AND MALAYAN UNITED INDUSTRIES BHD

(1990s)

THE Tan Sri Vincent Tan Chee Yioun-Lim Thian Kiat tussle at Multi-

Purpose Holdings Bhd and Magnum Corporation Bhd in the 1990s is considered

a classic case of `greenmail' in corporate Malaysia.

Tan kept steadily buying into Magnum until he stood poised at the 33.3%

trigger level for a mandatory general offer. Tan reportedly had a credit

line of almost RM1.1 billion from Chase Manhattan to help him in his fight

for Magnum.

Lim had only a Hobson's choice, and eventually bought Tan out for

RM310.2 million, and Tan walked away with an estimated RM47 million

profit. He became the toast of Kuala Lumpur for his seemingly shrewd

manipulation of Lim, seven years his junior.

Besides Magnum, Tan engaged in an 18-month tussle with Tan Sri Khoo Kay

Peng for the control of the latter's MUI Bhd in 1991. MUI then controlled

the much coveted MUI Bank and MUI Finance. Tan reportedly took a loan of

RM400 million to finance the takeover deal, but Khoo retaliated by

consolidating his interests in MUI.

By 1991, Khoo reportedly had 32.4% of MUI, and he managed to fend off

Tan's corporate raid by reportedly teaming up with Robert Kuok. The latter

then had an 8% stake in MUI. By 1993, the corporate tussle ended when Tan

divested his interest in MUI. He was reported to have gained RM30 million

from his divestment.