Monday, February 26, 2007

KeranaMu Malaysia II: ECM Libra Debacle Revisited

Picture from AgendaDaily

Buruh, nelayan dan juga petani
Gaya hidup kini dah berubah
Anak-anak terasuh mindanya
Lahir generasi bijak pandai

Pakar IT, pakar ekonomi
Jaguh sukan dan juga jutawan
Berkereta jenama negara
Megah menyusur di jalan raya

Alam cyber teknologi terkini
Kejayaan semakin hampiri
Biar di kota ataupun desa
Kita semua pasti merasa bangga

Keranamu kami mendakap tuah
Keranamu kami bangsa berjaya
Keranamu kami hidup selesa
Limpah budi kemakmuran negara

Keranamu kami bebas merdeka
Keranamu myawa dipertaruhkan
Keranamu rela kami berjuang
Demi bangsa kedaulatan negara (ulang dari mula )
Malaysia...Terima kasih Malaysia!

-- Composers and Lyrics: Pak Ngah/Siso Kopratasa

Today at 9:30 a.m. the Parlimentary PAC will reconvene to continue with the issue of the Merger between ECM-Libra and Avenue Capital. This issue has caused quite a bit of uproar in both the corporate circle and political.

Background of ECM Libra

ECM Libra started out as ECM, an Investment Advisory Company by David Lim and Lim Kian Onn, two former Hong Leong top guns. Then came, Dato Kalimullah into the picture with the idea of a takeover of Bumiputera Securities. Bumiputera Securities was a former subsidiary of BankBumiputera but left out of the package in the takeover by CIMB Group.

ECM, that became ECM Libra, subsequently undertook a backdoor listing via Tan Sri Azman's PLC to become ECM Libra Berhad. The Company start to transform itself into a Boutique Investment Banking Company.

The Company was employing the infamous SIL, Khairy Jamaluddin as Director of Investment Banking. Thats quite a jump for someone without Investment and Finance experiance, even for a claimed genius. It was then that ECM Libra was allegedly accused as an instrument for Khairy to do a "clearance sale " of Government assets to an Island nation.

Through a vendor financing scheme i.e. the sellers provide layaway plan, Dato Kalimullah, David Lim and Lim Kian Onn sold some of their shares to Khairy. Conveniently, few months later, a proposal was put to the Minister of Finance for a Merger between ECM Libra and Avenue Capital Resource Berhad.

Was It Merger Or Takeover?

What seemed like a Merger is actually an attempt to camouflage the true intention of a Takeover. The "Takeover" was to substantially expand the operations of ECM Libra and buffer the seasonal income of ECM Libra with stockbroking income from Avenue. That helps to undertake "other" operations. One, as a source amongst journalist, was to provide salary for some personality within Kalimullah's team.

The "Takeover" caused quiet an uproar. Websites and blogs were scrutinising the deal closely. Off course, the Opposition had their piece of the action. Kalimullah got himself a Court Injunction on Husam and Harakah to stop "talking" of ECM Libra. And, there is a suit and countersuit still pending between him and Mathias Chang, which the latter called him corrupt.

The public uproar slipped into the less-happy Company's EGM, namely Avenue Capital's. Some an hour and a half of drilling was levied on the Directors, whose response were cliche, leading shareholders to believe that a "gun was put to their heads to sign on the dotted line".

The two resolution to approve the merger with ECM Libra and waive the Mandatory general Offer to ECM Libra Shareholders were passed. It was reported as near unanimous but shareholders sources said it was only between 60-70% majority (including the managing shareholder, which strangely was voting). The equity held by Minority Shareholders seemed close to the votes opposing the Resolutions.

PAC in the Pix

The uproar has not ceased despite "their" victory. Among within UMNO circle, noises are loudly heard. In several Majlis Penerangan UMNO, the issue of ECM Libra kept cropping up. Finally, Dato Shahrir as Chairman of the Parlimentary Public Account Committee called for an enquiry into the ECM Libra affair.

Almost about the same time and during the rounds of opening UMNO Youth Division Meeting, Khairy announced his sales of ECM Libra shares, claiming loses.

The Ministry of Finance and Securities Commission officials have been called. After 6 months, they are reconvening again. This time Minister of Finance II, Tan Sri Nor Mohammed Yakcop will attend. Thus far, the PAC enquiries dwelled on the issue of procedural and overview of Government investment decision.

Unanswered Issues

It has yet to openly tell the public the answer to the ethical and moral issue of the Takeover.

  • Why was Avenue shares undervalued and ECM Libra overvalued by goodwill?
  • Why was there a "rigging" of ECM Libra shares in the market prior to announcement?
  • Why was the rather unfair term for purchase term on Avenue to buy ECM subsidiaries?
  • Why was the EGM proceeding at Avenue filled with improper procedures?
  • Why was "biased" valuation recomendation by Adviser K&N Kenanga accepted by SC?
  • Why was it that it seemed from the eye of many shareholders a "collusion" by various authorities has occurred?

There is also the issue of incongruence with the BNM and SC plans for the Securities and Banking Industry.

After the "Takeover" is completed, the merged entity ECM Libra - Avenue suffered RM15 million losses for Third Quarter ending October 31st, 2006. Some 23% of staff were laid-off.

  • Whose side did the loses came from? ECM Libra or Avenue Capital?
  • How much has ECM Libra's Boutique Investment Banking enhanced the Government's asset?
  • What happened to the much hyped Investment Banking license?
  • Why the need to lay-off staff?
  • Whose staff was affected? ECM Libra or Avenue Capital?
Will the Government admit that the Merger with ECM Libra is a bad decision? Now who decided? Will they admit its Baba deciding for SIL's request? Perhasp not.

During the uproar that lead to the PAC enquiry, one of the major shareholder David Lim sold his entire shares. Industry sources said David Lim was against the manner of the takeover from the beginning. And, Kalimullah? He sold his shares below the 5% level to avoid disclosure of his activities.

Lets not relent on this.

KeranaMu Negara Malaysia
Terima Kasih ... Malaysia

A Voice
Kuala Lumpur
February 26th, 2007 10:00 a.m.

Thank you to Manure United for highlighting my mistake. Yes, its not David Chua but David Lim.

The 3-hour PAC yesterday covered a wider scope than the ECM Libra issue and proposed a Second Cabinet Committee to oversea GLC investment. The first Commiittee focusing on high impact investment.

As far as ECM Libra, the following are whats reported in the Press today. NSTP, conveniently, at the far end of its report:
As Shahrir said Nor Mohamed had said that there was nothing unusual in the ECM Libra-Avenue Capital merger.
"The Securities Commission had given clearance for the merger," he added.
The Sun:
Another issue raised was the merger between ECM Libra and the government-owned Avenue Capital. On this, Shahrir said Nor Mohamed explained that there was nothing unusual about the deal since it had obtained clearance from the Securities Commission (SC).

"To say we are satisfied (with the explanation given) is not right since the PAC consists of representatives of various political parties. We all have a different degree of satisfaction. The government feels that since the SC had no objection and the majority of shareholders of the two companies want to merge, the merger should take place without any interference," he said.
AgendaDaily has a report also here.
So it seems, a February 9th, 2007 EdgeDaily reported that Tan Sri Azman bought out 18% of ECM Libra Avenue frrom Minister of Finance.

Well, can you smell that smell. And, as that famous line by the informer, Deep Throat in the movie "All The President's Men" would say, "Follow the money". What comes out of SC is all money. Wondering what is this market talk, "Its no more under the table but on the table"? Market talks too much, don't they.

There is still the suit and countersuit between Mathias Chang and Kalimullah goes to court. Someones gonna be poorer by lots of million.

A Voice
Kuala Lumpur
February 27th, 2007 11:00 a.m.



Waiting for the outcome.
Is your guess as good as mine?
Or will there be surprises?

Anonymous said...

there's no need to guess, nuraina. what can sharir do? fait accompli exercise?
chapter 2 has begun. the government has now sold out the entire balance of the strategic and controlling stake at a relatively cheap price of RM0.80 per share, in my view, coz avenue assets has tons of cash and is operating profitably.
why did the government, thru Khazanah, sell the strategic and controlling stake during a bull run and at that low price? surely the stake which is controlling deserves a higher premium. was Tan Sri Azman entice to take up the controlling stake because of the low entry level despite the prevailing controversy? and to also severe any further linkage and to completely erase the merger history?
only the actors of this play can answer!

Unknown said...

Anonymous 1:08 PM said...

1. "there's no need to guess, nuraina.

2. why did the government, thru Khazanah, sell the strategic and controlling stake during a bull run and at that low price?

For No. 1 - fait accompli exercise?

If Nuraina still in the media, guess what will the PM say if she asks: fait accompli exercise?

For No. 2 - ...and what will be the PM's answer to this:

why did the government, thru Khazanah, sell the strategic and controlling stake during a bull run and at that low price?

Will Saiful Apek surrender the Pelawak Popular Award to someone?

Anonymous said...

David CHUA not david LIM

Anonymous said...

Good background article on the surrounding issues.

Your article was also re-posted on another website, with others:

My Say