Liew, a man of many conflicts

By Khairie Hisyam

The resignation of Battersea redevelopment project chairman Liew Kee Sin comes close on the heels of a personal joint venture deal in London worth RM12 billion. Yet the conflict between the deal and his Battersea role is but one in a series of conflicts.

______________________________________________________________________

It was the third weekend of 2015 and Taiwanese heartthrob Wang Lee Hom was in Penang, alongside local stars Melody Tan and Najwa Latif, for property developer Eco World Development Group Berhad’s EcoWorld Starlight 2015 New Year Concert, which will see a series of three concerts ahead of the Lunar New Year.

As 10,000 visitors thronged the concert that weekend, Eco World non-executive board member Liew Kee Sin told a Business Times reporter on the sidelines that he has tendered his resignation as chairman of the Battersea Power Station redevelopment project.

“I am waiting for a response,” said Liew as quoted by the paper.

News of his resignation came about a week after Reuters reported of Liew’s personal joint venture deal with Irish developer Ballymore Group, worth nearly RM12 billion, to develop three residential projects in London, the same city where the Battersea project is ongoing.

And the shareholders of the Battersea redevelopment project are apparently taking their time to deal with Liew’s resignation. According to the Employees Provident Fund (EPF), which holds 20% interest in Battersea, the board had not decided on the matter and will meet this week.

“At this point, it would be premature for us to comment (on the matter),” said ECP CEO Shahril Ridza Ridzuan to KiniBiz last Friday. “The shareholders of Battersea will be convening to discuss the matter soon and the company will make an announcement at the appropriate time.”

The other shareholders of the project are property developer SP Setia and plantation-based conglomerate Sime Darby, who each hold 40% interest each. In turn SP Setia and Sime Darby share the same majority shareholder in Bumiputera trust fund Permodalan Nasional Berhad (PNB).

It is worth noting here that apart from the response to KiniBiz and Liew’s remarks to Business Times, there had not been any other announcements forthcoming from the Battersea redevelopment project or its shareholders.

At publishing time KiniBiz is still awaiting response to queries sent to Sime Darby, SP Setia and PNB.

While the Ballymore deal showcases a direct conflict between Liew’s personal business interests and his duty to Battersea’s shareholders as chairman of the board, it was far from the first – that road goes back to Liew’s final months as SP Setia head honcho, and a series of conflicts that has ensued since.

The surprising thing was that while the conflicts were apparent, no one at SP Setia or PNB and the other shareholders did anything about mitigating or removing them. Now, the conflicts have extended to Liew and the listed Eco World as well. And this may well involve the special purpose acquisition (Spac)vehicle for property as well that Liew is proposing.

Liew has already said that the UK Ballymore deal may be injected into the Spac, proposed last October which will focus on international property markets. The Spac has not even been approved by the Securities Commission yet.

Final Setia days

In late 2011, Liew’s 16th year or so at the helm of SP Setia, major shareholder PNB launched a bid to wrest control of the developer, offering a price that the SP Setia board deemed too low.

At that time, PNB was already SP Setia’s largest shareholder with a stake of 32.9%, just short of what will trigger a mandatory takeover offer. The offer seemed to have taken Liew by surprise.

When the dust settled, however, Liew acted as joint offeror and PNB gained majority control over the developer in 2012. Part of the deal was that Liew would only stay on for three years at most, which meant the clock began ticking for an exit by March 2015 at the latest.

Also part of the management agreement signed on Jan 20, 2012 was that Liew would have a put option to sell his stake in SP Setia, which totalled 11.27% of 200.5 million shares when the takeover was concluded, at RM3.95 per share, the takeover price at that time.

The final tranche of the put option was due in April, which was when Liew eventually took his bow after nearly 18 years behind the wheels of SP Setia, one year before the three-year period would have ended.  He sold his last 2.76% for a total of RM267.45 million in March last year.

Prior to his exit, however, observers have noted some uncharacteristic behaviour and comments.

In July 2013, the Battersea Power Station redevelopment project was officially launched in London, attended by Malaysian Prime Minister Najib Abdul Razak as well as his British counterpart David Cameron, among others.

Notably several hundred guests were flown in business class from Kuala Lumpur to attend the launch, with some of those present remarking to KiniBiz previously that Liew was hogging the limelight.

“It was all about him (Liew) basically, not so much Battersea,” said one newsman present to KiniBiz, noting that the apparent grandeur of the whole event raised eyebrows. “Would there have been such expenditure if Liew was not leaving, and if it was his own company or if he had more than his two odd percent (2.76% at the time)?”

In addition Liew had also made unusual remarks prior to the launch concerning SP Setia and majority shareholder PNB, among others saying to The Star in June 2013 that while SP Setia “may not grow” after his looming departure, PNB will not run down its own investment.

Another remark he had made is that had PNB not taken over the company the way it did, SP Setia shares may have performed better to the tune of 50% higher than where it had been post-takeover.

The remarks, decidedly not positive for neither SP Setia nor PNB, contrast with his own proclamation in the same interview that he is just doing his job as CEO to the best of his ability when asked about his coming departure.

“I’m not staying on and will not stay past March 2015. There’s no turning back, it’s over for me. Checkmate,” said Liew to The Star.

Eco World connection

The emergence of Eco World on the property scene in September 2013 shed a starkly different light on Liew’s conduct in the months prior.

In mid-September 2013, a private outfit called Eco World Development Holdings Sdn Bhd (EWDSB) signed a share purchase agreement with shareholders of low-key Johor-based developer Focal Aims Holdings Berhad, buying 65.05% for RM1.40 per share or RM230.7 million in total.

Following the takeover, a general offer ensued at the same price, though when the dust settled the buyers ended with the original 65.05%.

The move created much buzz in Corporate Malaysia given that EWDSB is staffed by former SP Setia bigwigs, such as former chairman Abdul Rashid Manaf, former director Eddy Leong Kok Wah and Chang Khim Wah, a former SP Setia bigwig who is CEO of EWDSB.

Notably Liew’s son Tian Xiong, then a 22-year-old graduate of the University of Melbourne, was also an acting party in the deal and his part in the transaction was financed by his parents, according to a later Bursa Malaysia filing.

This amounted to roughly RM124 million given Tian Xiong ended with a 35% shareholding.

In any case, the presence of his young son alongside his long-time associates from SP Setia stirred talk that EWDSB is Liew’s second coming given his exit from SP Setia was looming.

However when contacted by KiniBiz at the time, Liew denied any link to the deal. “I am not involved. It is my former directors (and not me),” said Liew.

When pressed whether he will end up at Eco World following his eventual departure, at the time Liew said: “I want to retire, enough of work!”

The Focal Aims takeover eventually saw the company renamed  Eco World Development Group Berhad and in April the following year, its shareholders announced a massive assets injection exercise that will add some RM30 billion worth of gross development value (GDV) to Eco World’s land bank, which will more than triple to 4,433 acres when the exercise is completed.

However the assets injection exercise as well as other components of the whole deal are yet to be completed, with the deadline pushed to February this year.

Despite this, Eco World’s meteoric growth rate since it burst into the scene places it firmly in the leagues of the established big boys of the property scene.

For the full 2014 financial year, which encompasses 13 months following a shift of financial year end, the company saw RM3 billion in total property sales, matching established names like Mah Sing Group, UEM Sunrise and Sime Darby’s Property division.

In Liew’s own words, spoken in a BFM radio interview last September: “For a developer who just started a year ago this is very, very impressive.”

To some extent, the rapid rise of Eco World can be traced back to the pedigree of its senior management team, which comprises former SP Setia top executives.

A previous report by a local research house estimated that 80% of Eco World’s employees — which amounts to 280 out of a total of 350 employees — came directly from SP Setia, though a senior SP Setia official argued to KiniBiz that this is not a concern as a bigger proportion of SP Setia staff is staying.

Little wonder then that there was much talk about “SP Setia genetics” running through Eco World, according to the company CEO’s past interviews.

Perhaps a singularly glaring example of how the pedigree has benefitted Eco World is when UDA Holdings announced in June last year that it has opted to go with the company alongside the EPF to redevelop the Pudu Jail as Bukit Bintang City Centre, a project estimated to be worth RM7-10 billion in terms of GDV.

Eco World will have 40% stake in the consortium and was chosen due to its “excellent record in developing projects”, according to UDA Holdings chairman Johari Abdul Ghani as reported by local media, a remark that contrasts with Eco World’s lack of historical track record as a newcomer onto the scene.

Notably Eco World’s new financial year end, shifted to Oct 31 from Sept 30, is the same as SP Setia’s own financial year end.

KiniBiz had previously examined the emergence of Eco World in a three-part issue series here.

The retirement that wasn’t

Despite growing talk in the market about Liew’s apparent connection to Eco World, he remained at SP Setia until he tendered his resignation in January 2014.

The reasons given appeared consistent with what he told KiniBiz of his desire to retire. “With my children all growing up and starting out on their own career paths, I am looking forward to spending more time with them, mentoring and guiding them,” said Liew.

Strangely however the same announcement said he will stay on as chairman at the Battersea redevelopment project as well as managing director of SP Setia’s Qinzhou development park in China for continuity reasons at the company’s request, said SP Setia chairman Zaki Azmi.

“The board is thankful that (Liew) has agreed and that Teow has also agreed to remain as chairman of Battersea Power Station Development Company Limited until September 2015 to help ensure the smooth and successful implementation of these internationally prominent projects,” said Zaki.

However the previously set-up management succession plan, which was supposed to see Liew’s long-time COO Voon Tin Yow step into the CEO role with then-CFO Teow Leong Seng taking over Voon’s place, was off as Teow was also leaving after July 31, 2014.

Notably at SP Setia’s Corporate Night on April 15, 2014, Liew hinted that his role at Battersea is a national service and added that the American military figure General Douglas MacArthur too had served his country.

“At the American Congress, (MacArthur) ended his speech with a line that has become well-known today. He said old soldiers never die, they just fade away. But this old soldier (pointing to himself) is going to rise up,” Liew was quoted as saying by The Star.

What he really meant became clearer after his exit from SP Setia. Less than a week after his final day on April 30, Liew surfaced on the board of Eco World as a non-executive director and the company declared to Bursa Malaysia that Liew has an indirect interest of 35% in the company through his son Tian Xiong’s stake.

Less than a month later however Eco World made another regulatory announcement saying that Liew has ceased to be a substantial shareholder after the company received a Form 29C of the Companies Act 1965 and a notice pursuant to Section 135 of the Act — both dated June 4, 2014 — clarifying that Liew “does not have any interest in the Company pursuant to Section 6A of the Act and should not be regarded as a substantial shareholder of the Company”.

Despite the strange backtrack, Liew remained a man with ties to two remarkably similar property developers in SP Setia and Eco World as a director in the latter while also managing two of the former’s projects, notably one of which is a high-profile venture into London vis-a-vis Battersea.

Apart from both being listed on Bursa Malaysia, market observers have also noted Eco World and SP Setia as having similar modus operandi in the market owing to the previously acclaimed “SP Setia genetics” in Eco World.

However Liew told a business radio station BFM last September that nothing keeps him awake at night and that he sleeps “very well”.

New adventure, more conflicts

In October last year, Eco World shook the market again when it announced its intention to subscribe to 30% of a proposed special purpose acquisition company (Spac) by Liew, eyeing international property markets.

Notably the Spac counts a hard-hitting line-up of directors, ranging from former long-time EPF CEO to several directors of local banks.

While the proposed Spac, called Eco World International Bhd, appears still very much in proposal stage – its prospectus has yet to be posted on the Securities Commission’s website – it had already raised concern among Battersea shareholders when the announcement was made.

One source told KiniBiz at the time however that Battersea’s shareholders are merely keeping a close watch on the situation given the Spac is by no means a certainty at that stage.

The Eco World conflict

The proposed Spac however raises conflict as far as Liew’s duty as an Eco World director goes as he is effectively proposing a personal venture that will hurt Eco World’s own prospects.

Should it materialise, Eco World International will be Malaysia’s first non-oil and gas Spac and double the total proceeds of all four previous Spacs combined, which between them raised RM1.9 billion from their collective initial public offerings (IPOs). In contrast Liew’s Spac is eyeing RM1.89 billion in gross proceeds.

In any case, the proposal raised eyebrows and more potential conflicts given Liew is an Eco World director and father to a major shareholder of 35% interest.

For one, Eco World’s intention to subscribe to the proposed Spac’s listing means its own prospects will be limited to Malaysian markets as its international exposure will be through its interest in the proposed Spac.

In other words, the company’s own director in Liew is embarking on a new outfit, sharing the same brand, which will cannibalise its Malaysian sister’s own prospects overseas.

By comparison, no other Malaysian property developer of note has the same restriction in going beyond Malaysian shores.

Also up in the air is potential conflict between the board of the proposed Spac and the board of Eco World, especially if they share the same members such as Liew: in passing an opportunity to Eco World International, would directors of Eco World Development Group be breaching their duties to prioritise their own shareholders’s interests?

In fact conflict had already risen given that Liew had registered the Eco World brand trademark in the United Kingdom for his own proposed Spac.

This goes against his duty as an Eco World director to act in the best interests of his shareholders – which in this case, extends to not denying the shareholders the opportunity to benefit from the Eco World brand overseas irrespective of whether the shareholders actually capitalise on said opportunity.

Looking beyond Liew’s conflicts within Eco World following the proposed Spac, the announcement of a new property venture focusing on international property markets also brought to fore questions on his role at Battersea.

Already there is conflict between his directorship in Eco World, a Bursa Malaysia-listed entity, and his roles in two of SP Setia’s property development projects. If Eco World International Berhad makes it to Bursa Malaysia, the implication is that Liew is effectively a competitor to Battersea.

This raises the concern whether Liew’s prolonged stay at Battersea means that the high-profile project, worth nearly RM50 billion over 15 years in GDV, will merely serve as a stepping stone for Liew’s second coming in the international scene.

With the Ballymore deal inked, the possibility of Liew being a competitor to Battersea is now a reality and the project’s shareholders are concerned, according to sources.

Tracing back what has transpired since Liew’s final months at the helm of SP Setia all the way up to the RM12 billion JV with Ballymore, it stretches the imagination to consider that developments have come together on an ad hoc basis, given the corporate heavyweights on Liew’s side both at Bursa Malaysia-listed Eco World and his proposed Spac.

“You can see that he planned this a long time ago,” remarked on market observer to KiniBiz.

Key men emerge

The emergence of the Ballymore deal raises another dimension to the various conflicts as far as Liew is concerned.

According to the Reuters report, the vehicle used by Liew for the deal is co-owned by Voon Tin Yow, his long-time right-hand man at SP Setia.

Notably Voon left SP Setia at the end of last December after taking over the president and CEO positions from Liew, although only in acting capacity.

In September BFM interview, Liew claimed that Voon, who had announced his looming departure by then, had not confided to him about where he wants to be after leaving SP Setia.

Interestingly another of Liew’s long-time lieutenant, former SP Setia CFO Teow Leong Seng, left SP Setia in end-July only to emerge as a director in Eco World International, Liew’s proposed property Spac.

According to public records, Teow was listed as a director in Eco World International on Sept 12, 2014.

The history of the three men goes back to their days before SP Setia, when Liew and Voon – both working in a local property development company – decided to team up and form a small property outfit in the early 1990s.

Eventually Liew and Voon’s company were absorbed by SP Setia with Liew emerging as CEO, a post he held up to his departure last year. They then invited Teow, the banker who aided with financing when they first struck out on their own, to join them at SP Setia.

The rest is history as SP Setia grew to be Malaysia’s foremost property brand in the years that followed. With the three teaming up again, it seems Liew is gunning for the big time a second time, though one emerging implication is that by taking away his successors as per SP Setia’s previously announced succession plan, Liew had also  hurt SP Setia’s continuity after his departure.

In any case, Liew’s pursuit of a second coming is hinted by Liew’s comments regarding the Ballymore deal whereby his proposed Spac will be offered the first right of refusal for interest in the JV.

But can a Spac be listed with a target deal already in hand?

Yesterday: Who owns the Eco World brand?

Tomorrow: In Liew’s Spac, another looming conflict