Anwar’s hand in UEM-Renong, says ex UEM director

By Khairie Hisyam

A shares acquisition worth RM2.3 billion in November 1997, which led to the KL Composite Index plunging by 20%, has been linked to former finance minister Anwar Ibrahim as more facets of the mysterious deal surfaced last week.

In a statutory declaration dated July 18, 2013 — though only released last weekend — former UEM director Syed Amin Al-Jeffri, who was a UEM director between May 29, 1997 and Sept 27, 2001, said Anwar had requested UEM buy shares of Renong Bhd.

Syed Amin said in the declaration that during a UEM board meeting “between late 1999 and early 2000 or thereabout”, the late Ramli Mohamad who was then managing director of UEM proposed that UEM buy shares of Renong to create a cross-holding between UEM and Renong.

“The managing director informed the board that the proposal came about as a result of a request from the then minister of finance, Anwar Ibrahim, to prevent UEM being taken over by foreign parties through hostile takeovers as there were quite a substantial (number of) foreign shareholders in UEM and also to push up the share market which was then facing a difficult time,” said Syed Amin about the proposal when its rationale was queried by the UEM board.

When the acquisition made on Nov 13 1997 was announced after the 5.00pm bell on Nov 17, 1997, the KL Composite Index dropped sharply to wipe out some RM127.78 billion in market capitalisation as investors started panic-selling Renong shares. By the end of the week, the 32.6% stake bought for RM2.3 billion was worth only RM1.08 billion.

UEM board approved UEM’s 32.6% buy

UEM’s board, after sighting Anwar’s letter on the proposal circulated by Ramli — although Ramli took it back after all board members have read it — voted in favour of the proposed transaction, except for Abu Hanifah who abstained.

The acquisition of 32.6% or 722.88 million shares for RM2.3 billion in Renong by UEM in 1997 raised eyebrows, not least of which is because it remains unclear where the shares came from.

When the purchase was done, two UEM independent directors — Earnest Zulliger and Thomas Lee — resigned, fuelling speculation that the purchase was not approved by the UEM board, though this is now disproved by Syed Amin’s declaration which revealed otherwise.

Among the conditions of the board’s approval of the transaction was that it must gain shareholders’ approval during a UEM extraordinary general meeting (EGM); that Halim Saad and his corporate vehicles with interest in UEM must abstain from voting; that Halim was to get a put-and-call option on the Renong shares at a price to be fixed later; and that Halim was to address shareholders during the EGM as to his commitments on the option.

Curiously it is unclear why the board proceeded with Anwar’s request, which was made via a letter circulated by Ramli to the board during the meeting, when Anwar would have been in detention when the meeting was held.

To recap, Anwar was arrested on Sept 20, 1998 and eventually sentenced to six years’ imprisonment in April 1999.

KiniBiz has contacted Syed Amin’s representatives on the discrepancy and is awaiting his response.

In any case the proposed transaction was later approved during the EGM and the UEM board subsequently exercised the put option on Halim for the Renong shares, valued at more than RM3 billion, according to Syed Amin’s declaration.

The price of the put option was RM3.16 billion, payable in four tranches with Halim agreeing to pay RM100 milion in three instalments throughout 2011, with the remainder to be paid with interest in May 2002. Halim paid the first instalment in February 2001, but by mid-2001 was contemplating buying over the remainder of UEM, via Renong in a general offer, which was an alternative to completing the put option.

Intervention by Putrajaya

However in July 2001, Halim was summoned by former premier Mahathir Mohamad to the latter’s office in Putrajaya, where he was instructed to let the government take over his shareholdings in UEM and Renong.

Halim was eventually advised against proceeding with the put option and his general offer plan, according to Halim’s billion-ringgit lawsuit against former Minister in the Prime Minister’s Department, Nor Mohamed Yakcop, the government and Khazanah Nasional which he filed last year.

This was corroborated by Syed Amin’s declaration which said Halim had announced to UEM’s and Renong’s respective boards that then-prime minister Dr Mahathir Mohamad had told him to “sell and relinquish his control over the UEM and Renong Group of companies”.

“No explanation was given by Halim Saad other than that the Prime Minister had wanted the Government of Malaysia to take control of UEM and Renong and that Halim Saad was to negotiate with Nor Yakcop, the then Economic Advisor to the Prime Minister,” said the declaration.

Subsquently, then-chairman of the Securities Commission Ali Kadir summoned the entire UEM board to his office “gave the following instructions and reiterated that the said instructions came from Putrajaya”, said Syed Amin in his declaration.

The instructions were for UEM not to entertain Halim’s request for extension of time even though he had paid RM100 million in deposit for the put option as well as not to give Halim any assistance in the matter, according to Syed Amin’s declaration.

Additionally Ali also reprimanded the UEM board for allowing the cross-holding to take place and told the board that they could be subjected to prosecution for the lack of corporate governance, said the declaration, adding that the UEM board had erred in allowing UEM to undertake the cross-holding of Renong shares even though Halim had a put-and-call option on said shares.

The final instruction was that for all the reasons outlined above, UEM’s board of directors should resign, according to the declaration.

In the lawsuit, Halim alleged that the takeover by the government of his assets during the Asian Financial Crisis (AFC) was unlawful as he was fraudulently induced to sell, claiming RM1.8 billion in compensation for him giving up his companies and losses from the rescue of Fleet Group and Fleet Holdings; general damages for a breach of purchasing his 16% of Renong for RM465 million; damages for fraudulent misrepresentation; interest; cost; and any other relief deemed proper.

However his lawsuit was struck out by the Kuala Lumpur High Court last October, although Halim has told KiniBiz that he is going to appeal the decision.

KiniBiz previously examined the lawsuit in a three-part issue series here.

“Lay-off”, said Nor Yakcop

While the UEM board argued for government support for Halim, eventually their efforts were fruitless.

In his declaration Syed Amin said that after Ali gave the instructions to the UEM board, the UEM board “then explained that the ‘purchase exercise’ was undertaken at the request in writing from the then-Minister of Finance, Anwar Ibrahim”.

The late Radin Soenarno, who was then chairman of UEM, also clarified that at the UEM EGM shareholders had unanimously and independently approved both the transaction and the put-and-call option, said Syed Amin, adding that Radin also stressed the fact that Halim as well as his related parties had abstained from voting during the EGM.

“Subsequently, Yahya (Yahya Ismail) and Ramli Mohamad and I met with Halim Saad and offered to bring up the argument that the relevant authorities/Government of Malaysia should help and assist Halim Saad to settle by giving consent/approval to Halim Saad to restructure and/or take UEM private as Halim Saad had already lined up funding to take UEM private,” stated Syed Amin in his declaration, saying that “we also informed him that we were willing to present the case directly to the then Prime Minister.”

The trio of Yahya, Ramli and Syed Amin then met then-prime minister Mahathir Mohamad at his office in Putrajaya and argued the case justifying support from the government for Halim, said the declaration.

Also argued by the trio was that if no support is forthcoming, then “the government should not interfere with the group’s plans and that the matter should be left to the shareholders to decide.

However Mahathir was not pleased, saying that the matter was out of his hands as he had made Nor Yakcop in charge of the matter, said the declaration. The trio was informed by Mahathir that if they wanted to pursue the matter further, they should go to Nor Yakcop.

“Immediately thereafter, all the three of us went to meet Nor Yakcop at his office,” said Syed Amin. “At that meeting, Nor Yakcop’s first words were for us to ‘lay-off’ and nothing came about of that meeting.”