[Note: Read Also: AWise: Prime Ministerial Protégé - Syed Mokhtar Albukhary by Andrew Ho - Editor]

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The Asian Wall Street Journal
18h January 2002

Malaysian Magnate Makes Bid For Government's Pernas Stake

By LESLIE LOPEZ

Staff Reporter of THE WALL STREET JOURNAL

KUALA LUMPUR, Malaysia -- Malaysian businessman Syed Mokhtar Al-Bukhary has submitted a bid to acquire Pernas International Holdings Bhd. in a complex deal valued at about one billion ringgit ($262.51 million).

Malaysian bankers and officials familiar with the proposal said Tan Sri Syed Mokhtar wants to acquire the government's controlling 32% stake in the investment holding company Pernas in two stages.

He is proposing to initially purchase a roughly 20% interest for about 260 million ringgit, or 2.05 ringgit a share. That is nearly a twofold premium over Pernas's current stock price of about 71 sen. He then intends to sell several of his privately held assets -- valued at about 700 million ringgit -- to Pernas as part of a plan to restructure the company's debt of almost two billion ringgit.

Tan Sri Syed Mokhtar submitted the plan earlier this month to Prime Minister Mahathir Mohamad, who is also finance minister, bankers said. Dr. Mahathir has yet to make a decision on the matter, a senior government official said. Tan Sri Syed Mokhtar, a publicity-shy entrepreneur from Kedah state, couldn't be immediately reached for comment.

The planned takeover of Pernas, an investment holding company with interests in property, hotels, manufacturing and trading, is likely to raise Tan Sri Syed Mokhtar's previously low profile in corporate Malaysia.

A onetime rice trader, Tan Sri Syed Mokhtar in recent years has quietly built a growing business empire, often using business associates as nominees in his corporate acquisitions, according to acquaintances. Over the past year, Tan Sri Syed Mokhtar has begun to consolidate his private assets -- including investments in independent power plants, property and a huge port operation -- in listed Malaysia Mining Corp. Bhd., which he controls.

Bankers and close associates attribute Tan Sri Syed Mokhtar's ascent in Malaysia's corporate scene, in part, to his cordial relations with Dr. Mahathir, who also hails from Kedah state. Senior government officials said the Malaysian premier is impressed with, among other things, the businessman's generous funding for Islamic charities. Tan Sri Syed Mohktar's private investment vehicle, the Al-Bukhary Foundation, has built two Islamic arts museums in Kuala Lumpur and another in Kedah.

Tan Sri Syed Mokhtar has also won plaudits from the government for his port operation, Pelabuhan Tanjung Pelepas Sdn. Bhd., or PTP, in which he controls a nearly 60% equity interest through various business nominees. PTP, a fast-growing port in Johor state on the southern tip of Peninsular Malaysia, is 30%-owned by Denmark's Maersk Sealand International and has begun to compete vigorously with Singapore, the world's second-busiest port after Hong Kong. PTP scored a major coup this week when Taiwan shipping concern Evergreen Marine Corp. announced it will move its container operations to PTP in Johor from Singapore. Dr. Mahathir praised the Evergreen move, saying it will bolster the Malaysian government's plans to develop the country as a regional shipping hub.

Tan Sri Syed Mokhtar's increasing prominence could prompt criticism, however, in a Malaysian corporate and political environment sensitized to allegations of cronyism. In the wake of Asia's 1997 financial crisis, the empires of several of Malaysia's biggest politically favored business tycoons imploded, buried under piles of bad debts. The biggest casualties: Former Renong Bhd. Chief Executive Halim Saad and Tajudin Ramli, who once controlled Malaysian Airline Systems Bhd., or MAS, the national carrier. Both men were proteges of once-powerful former Finance Minister Daim Zainuddin and enjoyed close relations with the Mahathir government, which has been forced to salvage Renong and MAS.

Tan Sri Syed Mokhtar's bid for Pernas comes less than three months after the government renationalized the listed company, which was privatized in 1996. In the initial privatization plan, Pernas paid 1.15 billion ringgit to acquire stakes in seven listed companies on the Kuala Lumpur Stock Exchange, plus other assets from then-controlling shareholder state-owned Perbadanan Nasional Bhd. Later, Fernrite Sdn. Bhd., a private company owned by 14 Pernas managers, planned to buy 32% of the enlarged group from Perbadanan Nasional for 495 million ringgit, a deal that valued each Pernas share at 2.05 ringgit.

But the Fernrite purchase was never completed. The 1997 financial crisis and the depressed Malaysian stock market undermined Pernas's share price, making the planned management buyout no longer feasible.

Pernas has controlling stakes in two other listed companies, Tradewinds Malaysia Bhd. and United Malayan Land Bhd. Under the second stage of Tan Sri Syed Mokhtar's takeover plan, the businessman intends to sell a small sugar refinery operation he owns to Tradewinds, a profitable concern and one of Malaysia's biggest sugar refiners. He is also planning to sell property interests, including several large parcels of land located in Johor state, to property developer United Malayan Land.