AWSJ : Scomi to Acquire Marine Assets Of Chuan Hup
Uncle Yap
Scomi to Acquire Marine Assets Of Chuan Hup
The Cross-Border Deal Between Malaysia & Singapore
Underscores Growing Ties
By LESLIE LOPEZ
Staff Reporter of THE WALL STREET JOURNAL
February 15, 2005
KUALA LUMPUR, Malaysia -- In a deal underscoring the growing
commercial ties between Malaysia and Singapore, Scomi Group Bhd.
announced a complex plan to acquire the shipping assets of
Singapore-listed logistics group Chuan Hup Holdings Ltd.
Analysts say the deal would make Scomi -- an engineering-services
concern controlled by Malaysian Prime Minister Abdullah Ahmad Badawi's
son -- a key player in the region's marine-services sector. The
neighboring states often have bickered, but relations have warmed
significantly since Mr. Abdullah succeeded Mahathir Mohamad as
Malaysia's leader in November 2003.
The planned Scomi-Chuan Hup transaction is the latest in a series of
cross-border business deals announced in the past year. In March,
Singapore's state-owned investment company, Temasek Holdings Pte.
Ltd., paid 1.6 billion ringgit ($421.1 million) for a 5% interest in
Telekom Malaysia Bhd., the state-controlled telecommunications giant.
Temasek is also close to completing its proposed purchase of 30% in
listed Malaysian Plantations Bhd., an investment holding company that
owns midsize Alliance Bank Bhd.
Under the planned Scomi-Chuan Hup deal, Habib Corp. Bhd., a
Malaysian-listed jeweler, will acquire Chuan Hup's marine assets for
1.3 billion ringgit. Habib plans to finance the purchase through a
combination of debt and the issue of new shares, which will be offered
to Scomi, Chuan Hup and selected institutional investors, executives
from Habib and Scomi told reporters yesterday.
Scomi will pay slightly more than 200 million ringgit to acquire 29.6%
of Habib's enlarged paid-up capital through the purchase of 174
million new shares in the company at 1.15 ringgit a share, the
executives said. The purchase will make Scomi the single largest
shareholder in Habib, followed by Chuan Hup, which will own about
28.9% of the Malaysian jeweler's enlarged paid-up capital under the
proposed transaction.
The Habib family, which owns more than 66% of the company, will see
its stake diluted to slightly less than 17%. The transaction, which
must get regulatory and shareholder approvals, is expected to be
completed within the next six months, said Scomi's vice president,
Hilmy Zaini Zainal.
Investment analysts have generally welcomed the deal. "We're still
crunching the numbers, but operationally there are strong synergies in
this deal," said a research director with a stockbroking firm. Shares
of Scomi and Habib have been suspended since Feb. 8, while shares of
Chuan Hup were suspended from trading on the Singapore Exchange on
Friday. Scomi is controlled by Kamaluddin Abdullah, the only son of
Malaysia's premier. It has emerged as one of Malaysia's most closely
watched companies. Early last year, the engineering-services
corporation drew attention and scrutiny when its name surfaced in
connection with investigations into an international smuggling network
that sold Pakistani nuclear know-how and technology to Libya, Iran and
North Korea.
Mr. Kamaluddin's one-time associate, Sri Lankan businessman Buhary
Syed Abu Tahir, had commissioned a Scomi unit to produce centrifuge
components that regional security officials allege Mr. Tahir was
selling to Libya for use in its nuclear program. The parts
manufactured by the Scomi unit were intercepted at an Italian port in
October 2003 by U.S. and European security officials. Mr. Tahir, who
the U.S. said was a key middleman in the nuclear smuggling network
headed by disgraced Pakistani scientist Abdul Qadeer Khan, has been
detained in Malaysia since May under the country's security laws,
which allow for detention without trial.
The Malaysian police have cleared Scomi of any wrongdoing and the
company denied any knowledge of Mr. Tahir's alleged connections to
nuclear programs.
These days, Scomi is being closely tracked by investment analysts as a
strong proxy for Malaysia's vibrant oil-and-gas sector. Since its
listing on the Malaysian stock exchange in mid-2003, Scomi has grown
rapidly through acquisitions. Oil-industry analysts say it is the
world's fifth-largest drilling fluids services provider in terms of
market share.
Securities analysts say the proposed acquisition of Chuan Hup's
shipping assets will make Scomi the largest marine-services operator
in Southeast Asia and put the company on solid footing to take
advantage of the explosive growth in Malaysia's oil and gas sectors.
In the past two years, foreign companies, in joint ventures with
national oil corporation Petroliam Nasional Bhd., or Petronas, have
made large deep-water oil and gas strikes off the coast of Malaysia's
Sabah state on Borneo. The discoveries are expected to turn the energy
sector into a key driver for the Malaysian economy. Industry analysts
estimate close to 10 billion ringgit a year will be spent on
exploration and production activity in the area after 2006.
Support services in the oil-and-gas sector are contracted out by
Petronas to Malaysian companies, which in turn subcontract the work to
foreign concerns such as Chuan Hup. Scomi's Mr. Hilmy told reporters
that the purchase of Chuan Hup's marine assets will allow the
Malaysian company to participate directly in the country's energy
sector and let Scomi to take advantage of the Singapore company's
position as the largest coal transportation provider in Indonesia.
Write to Leslie Lopez at leslie...@wsj.com