By Sherilyn Goh
Low-profile tycoon Syed Mokhtar Al-Bukhary has finally laid his hands on NCB Holdings Bhd which owns one of the two main container ports in Port Klang. This adds to the list of his port assets, controlling all ports in the peninsula but one. Tiger wonders how many ports can one Syed Mokhtar own and whether he has run foul of competition laws.
According to a Bursa Malaysia filing on Oct 19, MMC Corp Bhd has proposed to acquire 53.42% of NCB Holdings Bhd’s shares from Permodalan Nasional Bhd and Amanahraya Trustees Bhd for RM4.40 per share, a deal valued at RM1.1 billion.
Should the deal materialise, MMC – which has been aggressively accumulating the country’s port assets – will see its stake in NCB raised to 83.55% from 15.73% previously, triggering a mandatory general offer (MGO) to acquire the remaining shares it does not own, effectively bringing the port operator private under the MMC flagship.
MMC Corp is owned by none other than media-shy tycoon Syed Mokhtar Al-Bukhary, who holds a 51.76% stake in the group, and who has been diligently expanding his “port-folio” alongside his other lucrative business ventures ranging from plantations, utilities, defence to transportation and logistics.
Talks of his ambition to take over NCB have, in fact, been surfacing from as early as March 2013. Syed Mokhtar subsequently staked his claim on NCB for the first time, after MMC announced its intention to acquire from MISC Bhd a 15.73% stake for RM221.98 million cash in November 2014.
This year, it acquired another 5.32% and 9.08% share from Port Klang Authority and Kumpulan Wang Persaraan (KWAP – Retirement Fund Inc) respectively.
Within less than a year, it is now proposing to fully take over the port operator, with the near term view of delisting it from Bursa Malaysia upon successful takeover.
NCB’s assets include Northport, which operates a container terminal in Port Klang and its logistics arm, Kontena Nasional Sdn Bhd, which is one of the largest haulage companies in the country, albeit recording losses of RM70 million and RM55 million for the financial years 2013 and 2014 respectively, attributed to several loss-making contracts.
Should the deal come through, the acquisition of 53.42% shares and the remainder via an MGO will be worth a total of RM1.45 billion. The MGO also took analysts by surprise as MMC is currently under high gearing, while the latest acquisition will be funded with bank borrowings. So what compelled MMC to proceed with the aggressive takeover?
NCB Holdings controls one of the three port operators of Port Klang. The other two competitors in that region are Bursa-listed Westports Holdings Bhd helmed by the Gnanalingam family and, to a smaller extent, Southpoint owned by the Port Klang Authority. Northport shares the same hinterlands as Westports and thus the two compete directly for gateway.
Of the two, Westports has clearly been enjoying the upper hand of the competition, dominating 58.4% of gateway business share and 80% of transhipment business share of Port Klang in 2013. Several capacity expansion exercises are also in place to capture the traffic of one of Peninsular Malaysia’s busiest ports.
Companies linked to the reclusive tycoon also controlled three other ports, namely MMC’s wholly-owned Johor Port, 70%-owned Port of Tanjung Pelepas (PTP) in Johor which is Malaysia’s largest container port by throughput volumes, and Penang port which he has taken private from the Ministry of Finance in December 2010.
Through MMC and its various subsidiaries, Syed Mokhtar effectively controls all of the port operators in Peninsular Malaysia except for one which is Westports, giving him a virtual monopoly of the maritime logistics business. The tycoon is already well known for his penchant for monopoly business, and for taking previously state-owned or public listed entities private too.
With Northport now under MMC’s wings, Syed Mokhtar seems to have wiped out almost all competition in his strategic move of building his own port empire. Which leads Tiger to ask, what will Syed Mokhtar do given all his port assets?
Analysts are of the view that Syed Mokhtar, through MMC, will list its port holdings under a new entity, thus creating the largest listed port operator on Bursa Malaysia, according to MIDF Research.
While port tariffs are regulated and big multinational clients conventionally have more bargaining power over port operators, the question is: will that change given that MMC owns most of the ports in Peninsular Malaysia except for one now? Why would we do away with competition which keeps the industry robust instead of putting them all under one group?
And wouldn’t owning all but one port in the country be a violation of competitive laws?
Recall that in 2011, when AirAsia and Malaysia Airlines entered into a collaboration agreement in conjunction with a share swap arrangement that was subsequently unwound, they were fined RM10 million each when they were found to be guilty of anti-competition practices by the Malaysia Competition Commission (MyCC). Both airlines are appealing against the ruling.
With a foothold in all the major container ports along the west coast, one thing for sure is that MMC will have more bargaining power against the government on lobbying for issues concerning port operations such as tariffs and concessions that could be made favourable to the group. In 2013, Northport was awarded a new licence by the government to operate the port for a further 30 years until 2044.
From a business perspective, while there are synergies to be created from bringing all the ports under the wings of MMC, the question is: do they have the ability to do so?
To-date there is little evidence of cooperation between PTP, Johor Port and Penang Port, all of which have been working independent of each other despite sharing a common shareholder in MMC. MMC has to prove that it is able to attract higher traffic to the region and generate more revenue by bringing all the ports under its group of companies.
This is more so with the acquisition of NCB Holdings, of which logistics arm is currently loss-making, as MMC will have a lot more to prove by its ability to turn around the unit.
After all, it is one thing to accumulate strategic assets by buying up stakes, and another thing to make different business entities work out synergistically in one’s favour. It remains to be seen if MMC will be able to make bigger things out of its new acquisition, but sometimes it’s best to just leave businesses running on their own management expertise.
But then again, what does a Tiger know about running ports and containers.
GRRRRR!!!
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