All About Property 1 Land Controversy

The 110-year-old Goh Ban Huat Bhd (GBH) is one of those unfashionable bricks-and-mortar companies. It has been making losses in the last four three years, is managed by the third generation of the Goh family and is in the midst of re-engineering itself to stay relevant. The operating environment for its core ceramic products, which range from sanitary to tableware, is very tough with cut-throat competition, especially from China. In the midst of all this comes Tan Sri Robert Tan Hua Choon, a seasoned businessman in Corporate Malaysia. Tan first emerged as a substantial shareholder in GBH on Dec 5, 2006, with a 10.79% stake. That was the start of the Gohs losing control over GBH. How Tan accumulated shares in GBH was not clear then, but the answer probably lies in a block of shares pledged by the Goh family with Alliance Bank. The Goh brothers, in a legal suit, claim that there was a forced sale of a block of 11.4 million shares, or 18.4%, by the bank in September 2006 without prior notification. The matter  is still pending in the courts. The block was pledged by Ceramtec Sdn Bhd with the bank between 2000 and 2005 to support a third-party loan. Ceramtec is the holding company of the Goh family. Two of the members are Tony Goh Tai He and his older brother Alex Goh Tai Seng. The former is the managing director of GBH while the latter is the executive chairman. Barely two months after the sale, Tan emerged as a substantial shareholder in GBH, with a 10.79% stake. This proved to be a launch pad for his big plans for GBH.

 In January 2008, Tan announced the purchase of an additional 12.2 million shares, bringing his stake to 30.45%. The transactions were done via off-market married deals. Two weeks ago, he made a general offer to take control of the company at RM1.25 per share, and later declared that he held 33.11%. According to sources close to the Gohs, they were not aware of the sale by the bank until they found out that large blocks of shares were transacted off market. The sources say the Gohs claimed that the so-called notice was given in August 2005, which was 13 months before the sale of shares. On top of the 11.4 million shares, it is believed that there was another forced sale of 2.6 million GBH shares pledged by another shareholder. “It is believed that the blocks of shares eventually ended up with Tan. The average market price from September to December 2006 was 88 sen per share. In the three-month period, the stock hit a low of 60 sen on Sept 22, 2006,” adds the source. Following the sale by the bank, it is learnt that Ceramtec filed legal suits on the matter in early 2008. The transaction left Ceramtec with a 15.94% stake in GBH, making it the third-largest shareholder after Tan and Lembaga Tabung Angkatan Tentera (LTAT), which has an 18.19% stake.  Tony and Alex own 0.45% and 0.51% direct stakes in GBH respectively. Add the shares held via Ceramtec and their family members and Tony’s indirect interest in the company rises to 17.06% and Alex’s to 17.7%.

Gohs to fight on
When contacted, Tony declined to comment on the matter (sale of pledged shares) as it is subjudice, but insisted that his family will go to great lengths to retain the business that has been with them for three generations. “If GBH is taken away from us, it will be very tragic. It has been 20 years since GBH’s listing and my family has never sold any shares,” says Tony. The brothers may lose the family business in the event minority shareholders accept Tan’s takeover offer and increase the latter’s interest in the company to more than 50%. LTAT, which has been with GBH for 20 years since its listing in 1989, is caught in the middle of the tussle in view of its 18.19% stake. If it sides the Goh faction, they would collectively own more than 35% of the company. With friendly parties, their stake could increase to 40%. Nonetheless, it is not known if LTAT will get involved in the fight, and it is not known who among the 30 large shareholders are friendly to Tan. What could temporarily prevent minority shareholders from selling their shares to Tan is that the GBH board (excluding Tan and two directors connected to him) announced last week that the company is seeking alternative offers. This may force Tan to up his current mandatory general offer (MGO) price or stop his takeover bid. GBH’s net tangible asset per share is RM2.54, a steep premium to Tan’s MGO offer price of RM1.25. An observer points out that LTAT may not take up Tan’s offer at the current price. But if he opts to increase his offer price to an attractive level, it would be difficult for LTAT to remain loyal to the Gohs. “After all, if the price is attractive, it becomes a business decision,” the observer says. Moreover, if there is no other party making a takeover offer, minority shareholders who want to exit the company may finally sell to Tan.

Land the real issue
Although GBH is a popular bathroom ware brand among Malaysians, many believe that the real value of GBH and the reason corporate players like Tan want to take control of it is the attractive landbank the company owns in prime areas in the city. The parcels of land are located in Jalan Segambut, about 2km from Kenny Hills, and are served by Jalan Kuching, Jalan Duta and the Duta-Ulu Klang Expressway. Collectively, they are valued at RM119 million. But considering its proximity to the Mont’Kiara area, the land holds tremendous potential for commercial and residential development. On the land, Tony says the company had previously received an offer of RM160 million for the parcels from a prospective buyer, but the deal fell through in mid-2008 due to the global financial crisis.The land and the ceramic business are the family’s legacy, which Tony thinks should not be disposed of as they are valuable assets. “We will know how to reward the shareholders when we develop the land,” he says. It is learnt that the parcels of land are zoned for industrial purpose. A land surveyor says an industrial parcel, if converted to commercial use, would fetch a 5% higher price. As for Tan, he is not known to be interested in the ceramic division. The land in Segambut, which hosts the warehouse for GBH’s ceramic wares, is probably something that would appeal to him. And like any other businessman, when an opportunity presents itself, he will probably seize it. Another way out for the Gohs will be if the independent adviser for the deal — AmInvestment Bank Bhd — decides on a higher price. Tony says AmInvestment Bank is in the midst of making a fresh valuation of the company. Subject to its recommendation, he would not disclose the “fair” offer price.

While the Goh faction “respects” Tan as a “capable businessman”, Tony says “it is a sad story” that the family is in danger of losing its century-old business. Tony is the youngest of nine sons while Alex is the seventh. The brothers took over the business from their late father Goh Siang Kow after he passed away in 1987. The company itself has not been having it easy in the past five years. It made losses in four of the past five financial years. It was hit by high energy costs, a slump in domestic demand and competition from manufacturers in China. The recent global economic slump made matters worse. While the current operating environment is tough, Tony says GBH remains optimistic about  its ceramic business. “We will find ways and means to improve the company. It’s a cycle. We are comfortable with our ceramic business. It’s something we can handle,” he adds.

Temporary respite
But can they outwit veteran Tan in his bid to take over the company? “We have always been respectful of him. Like it or not, he is a registered 30.45% shareholder [then]. We have listened to him… we respect him. Whenever his suggestion is good, we implement it immediately,” says Tony. “But the takeover is pretty hostile. It’s a sad story,” he adds.

After Tan emerged as the single-largest shareholder, he appointed accountant and auditor Tang Tat Chun and ex-merchant banker Thor Poh Seng to the 11-member board. The board came under scrutiny at the shareholders’ annual general meeting (AGM) held on June 26. Five directors were up for re-election and one was seeking reappointment. The five were Tony, Tan Ah Cheun, W Shalihudin W Ibrahim, Tan and Thor. Mohamed Amin Mohamed was seeking reappointment. “Even before the AGM, speculation was rife of possible board changes in GBH, particularly involving the ouster of old hands,” says an official familiar with the events. On the eve of the AGM, Tan announced a voluntary general offer (VGO), lending credence to talk that some of the directors may be ousted. According to shareholders who attended the meeting, even before the resolution on the directors’ re-election was mentioned, there was a long debate over whether Tan could exercise his rights considering that he had already made a VGO for the company (a day before the meeting). According to regulations, an acquirer is not allowed to vote on matters related to the re-election or appointment of directors. “After the chairman ruled that Tan could not exercise his rights… all sailed through. The board remained intact,” says a shareholder who declined to be named. The meeting itself was fiery because of the VGO. It was reported that several minority shareholders supported the Goh faction not only because the family founded the company, but also because they felt Tan’s offer was too low.

There is an old Chinese saying that the wealth of a family can never be passed beyond the third generation, or that a family business can never be retained in the hands of the family members after the third generation. In GBH’s case, the Goh brothers certainly do not wish to see the family business end in an unexpected tussle. So far, they have managed to stave off any move to remove them from the board. The question is, how long can they fend off Tan?

This article appeared in Corporate page of The Edge Malaysia, Issue 762, July 6-July 12, 2009

The fact is..

People are fighting for land knowing land is getting more valuable and less especially prime location like Segambut which surrounded by matured high-end residential like Mont Kiara and Kenny Hills. The land above measuring 16 acres holds tremendous opportunity for commercial and residential developments. In mid 2008, the land is in the mid of disposal but due to economy crisis, the buyer decided to hold back which gives Mr RT extra chance to take over the land via equity control. It was the smartest and most profitable move make by him. Virtually he only invested less than RM100M to take full control over the prime land or translate into 40% below the current market value. Furthermore with the potential Gross Development Value of more than billions dollars, I expect this development going to be Mr RT lifetime income stream that will never dry up. Look at Mid Valley today it was integrated city with car park, entertainment centre, Shopping mall, hotel, office and a lot more.

Endless stream of rental income

As what the owner of Mid Valley said, if you are serious about retailing business, you must open a branch at Mid Valley. The crowd is much beyond your imagination. Today Mid Valley valued at RM1.77B excluding 2 office towers to be built next years and they are collecting RM200+ M rental for financial year 2008 @ RM17M per month. The stream of income is tremendous. How nice if we are collecting RM17M rental per month!! I believe this is what Mr RT plan for his land that acquired from GBH. Or I would rather say if I’m in his position, I will develop and built an empire that will generate steady lifetime income stream for me. Congratulation to Mr RT, I salute you for your great achievement and passion. Happy Investing.

You cannot Grow Land..CK Wong & My Dad

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