By Khairie Hisyam
There was a puzzling diversification into oil and gas and there was also a puzzling discrepancy in terms of valuations. A court proceeding recently commenced against a former director may shed more light on Protasco’s mysterious misadventure in 2012.
More than three years after engineering and infrastructure company Protasco Bhd went on a strange detour into the oil and gas (O&G) sector, the question marks looming heavily over its diversification move back then have finally come back to haunt its shareholders.
State newswire Bernama reported on Jan 15, 2016 that a former Protasco director, Tey Por Yee, was charged at the Ampang Sessions Court for alleged fraud involving RM68 million and for allegedly making a false declaration four years ago.
The charges centre around a company called PT Anglo Slavic Utama (PT ASU), which was linked to a shares acquisition deal signed by Protasco in December 2012. The proceedings will be watched closely by Protasco shareholders, who may still be nursing some burning – and unanswered – questions over the proposed transaction more than three years ago.
The first charge against Tey is for allegedly not disclosing his interest in PT ASU when Protasco was undertaking a shares acquisition, which effectively making him a conflicted party. The second charge against Tey is for allegedly making a false sworn declaration before a commissioner of oaths that he does not have an interest in PT ASU.
Long-time corporate Malaysia observers may recall that according to the original shares acquisition deal between Protasco and PT ASU back in December 2012, Protasco was going to buy 76% equity of a company called PT Anglo Slavic Indonesia (PT ASI) for US$55 million.
PT ASI is wholly owned by PT ASU. In turn, PT ASU is wholly owned by Anglo Slavic Petrogas, which is based in the British Virgin Islands, according to regulatory filings at the time.
Then in early 2014, Protasco and PT ASU amended the agreement. According to the amended deal, Protasco would now be paying US$22 million (RM68.4 million at the time) for a 63% stake in PT ASI.
This raised eyebrows – the original deal values PT ASI at RM233.56 million at exchange rates then while the amended deal values it far lower at RM108.57 million. By any measure, it is an astounding drop of valuation in just 13 months or so.
As at end-May 2013, PT ASI’s nett assets stood at RM31.4 million and it has been recording losses for three consecutive years up to 2012. Strangely so for a company that indirectly controls the rights to develop and produce oil and gas in the Kuala Simpang Timur Field (KST Field) in Aceh.
Protasco explained the discrepancy as being arrived at on a “willing buyer, willing seller” basis following a shares valuation report done by KPMG Singapore dated Jan 20, 2014. In addition there was a clause in the original agreement that allowed for renegotiations if an independent valuation finds the shares to be worth outside of a US$50-60 million range.
That particular clause may have saved Protasco’s hide in this regard, although the question remains to this day on how the original value for PT ASI shares was arrived at in December 2012 and whether enough due diligence went towards negotiations at the time.
Given the big shift in valuation, minority shareholders at the time would have rightly been concerned over the deal, as it would have gone forward without coming to a vote in a general meeting since the value of the deal came to 24% of Protasco’s nett assets at the time. The regulatory threshold requiring shareholders’ approval is 25%.
With the court proceeding against Tey more information may come to light and resolve some of the mysteries that remain. One of these mysteries is what connection there was between a publicly listed Indonesian company called PT Inovisi Infracom Tbk and the selling owner of PT ASI.
This question arose as the amended shares sale agreement stipulated that 297.1 million shares worth US$30.3 million in Infracom were blocked as security to repay Protasco’s RM50 million deposit and purchase price should the deal be called off.
Interestingly, this guarantee involving Infracom shares was not in the December 2012 agreement, only added via the amended agreement in early 2014, according to regulatory disclosures to Bursa Securities. It remains unclear who provided this guarantee and in what capacity as regards to the shares sale transaction between Protasco and PT ASU.
In light of this information, however, an interesting trivia which may or may not be material is that the original deal in December 2012 was announced a little more than two weeks after Ooi Kock Aun was appointed to the Protasco board on Dec 10, 2012. At the time, Ooi was also chief financial officer at Infracom.
So many questions, so few answers. Perhaps the proceedings against Tey may shed more answers that minority shareholders in Protasco have been yearning for.
GRRRRR!!!
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