Well the deal is off. The Malaysian taxpayer has so far only lost RM480 million. That is the amount Maybank (a GLC and hence a taxpayer owned company) has paid in deposit money to the Singaporeans to buy over a lame duck bank called Bank Internasional Indonesia (BII).
Now it is debateable if Maybank can recover any of the RM480 million deposit money from the Singaporeans. There are calls now that the Directors and Senior Executives of Maybank should resign if they cannot recover the RM480 million.
'KUALA LUMPUR 6 August: Malayan Banking Bhd's (Maybank) board of directors and senior management should step down if the bank fails to get back its RM480mil deposit for the PT Bank Internasional Indonesia (BII) deal'
Maybank agreed to buy 56% of BII for RM4.86 Billion from Temasek Holdings of Singapore. Eventually Maybank would have to pay RM9.0 Billion for an almost 100% stake in BII. But the deal has been torpedoed by Bank Negara after Indonesia changed their bank acquisition rules. (This is what happens when you venture into strange countries which have strange ways of doing business. Remember the TNB coal mine fiasco in Indonesia where TNB lost about RM2.4 billion).
And the man in the centre of the controversy : none other than Second Finance Minister Nor Mohamed Yakcop. Nor Mohd is no stranger to making multi billion Ringgit and hundred million Ringgit losses for the Malaysian taxpayer.
First here is what Nor Mohamed said about this 'fantastic deal' in May:
KUALA LUMPUR, May 14 (Reuters) - Malaysia's government on Wednesday rejected opposition criticism against a flurry of acquisitions by top lender Malayan Banking Bhd , saying it was necessary to catch up with neighbouring Singapore. Second Finance Minister Nor Mohamed Yakcop told parliament that Malaysian banks must grow and develop into regional banks to better compete with their peers in the region. 'This is a golden opportunity,' he said. 'It will bring long-term benefits.' Long criticised for being too slow to expand overseas, state-controlled Maybank suddenly sprang into action in March. It bought 15 percent of Vietnam's An Binh Bank for $135 million and a week later paid $2.7 billion for a controlling stake in Bank Internasional Indonesia (BII) .
This month, it bought 15 percent of Pakistan's MCB Bank for $680 million, which analysts said was a high price and that it might have to cut the proportion of profits it pays out as dividends and raise capital to restore its balance sheet.
'This is in line with the government's long-term plan to strengthen the country's financial sector and turn it into a regional financial hub especially in Islamic finance,' he said. 'We need to compete with Singapore to develop regional banks.' 'Maybank may have paid a higher price, but it needed to make this decision to compete with Singapore.
This is a completely illogical statement. Nor Mohamed forgot to mention that he was actually bailing out the Singaporenas. They were getting out of BII. How do you compete with the Singaporeans in a business which they have just sold to you? They have exited the scene. And are we really expected to believe that the Singaporeans will sell us a business so that we may happily 'compete with Singapore'?
In 1999, Temasek had paid RM735 million for the same stake. In 2008 Maybank agreed to purchase the BII stake for a hefty price tag of RM4.86 billion. This means Temasek would have made a profit of RM4.125 billion ie 6 times their initial outlay. This was the real reason why Temasek was willing to sell the stake. It was a chance for Temasek to disengage from a troubled investment at a hefty profit - at the expense of the Malaysian taxpayer, and the gain of the unscrupulous high and dirty.
Analysts had also questioned why Maybank had agreed to pay 4.5 times the current market price of BII.
The news item makes it clear that Maybank's purchase of stakes in poor quality banks in Vietnam, Pakistan and Indonesia is actually a Government directive (read Nor Mohamed Yakcop's directive). As the 2nd Finance Minister Nor Mohamed has complete say over the GLCs like Maybank, Khazanah Nasional, Sime Darby and others.
Khazanah too has been led by Nor Mohamed to make dubious investments in India, which so far have zero benefit to the country or to promoting new technologies in Malaysia – the original intent of Khazanah Nasional Bhd. We have not heard about the value or profitability of investments like the Appolo Hospitals in India. But as usual money has been spent. And as usual the middlemen are always there to make their cuts and commissions.
Then the Sime Darby, Golden Hope and Guthrie Bhd merger created an almost RM30.0 billion listed plantation giant. Nazir Razak's CIMB group and other 'con-sultans' and middlemen made hundreds of million of Ringgit in fees and commissions from arranging this deal. By coincidence or not the consumption of RM150 cigars by the high and dirty has also increased in tandem with all these strange investments, acquisitions and mergers.
There was no real value in creating such a monster plantation giant. Whatever little competition may have existed among plantation GLCs was effectively extinguished through this merger. And Sime Darby is now underperforming on the Bursa. Here is a Star report dated 7 August 08 :
KUALA LUMPUR : Heavyweight plantation stock Sime Darby dragged blue chips lower in early trade on Thursday.. . Sime Darby fell 15 sen to RM7 in active trade'. Prior to the merger Sime Darby's share price reached a 52 week high of RM13.40.
If there are no real economic benefits for the shareholders and the taxpayers in all these mergers and acquisitions, why then do the GLCs embark upon such wasteful acts? The answer lies in another question : Why are the major cash rich GLCs suddenly moving in the direction of mergers and acquisitions? Why merge Sime Darby, Guthrie and Golden Hope? Why should Khazanah buy Appolo Hospitals in India? Why does Maybank suddenly want to buy banks in Pakistan and Indonesia?
And perfectly good assets that belonged to the taxpayer like Avenue Capital were sold to ECM Libra – a private company owned by Kalimullah Hassan, Khairy Jamaludin and others. Obviously the cash rich GLCs are being directed to do these things.
After all it is taxpayers money. The middlemen make the fees and the commissions. The cronies make the big bucks. And foreign deals are also easier to 'manage'. The fees and commissions can be paid directly into foreign bank accounts – out of sight of the half blind ACA and our local Police boys (who are busy stealing millions of Ringgit in drugs from their own safekeeping).
These wasteful deals are just a method for the high and dirty to cream off money. Due to the serious lack of competent Ministers in the Cabinet who cannot understand what is going on the 2nd Finance Minister is looked upon as someone who knows what he is saying and doing. The truth is losses are being made – in the hundreds of millions.
The 2nd Finance Minister is soon expected to have his own listed vehicle (again). He was once Chairman of Mun Loong Berhad which also went bust. According to sources in the Securities Commission, an oil and gas company will soon be listed whose bumiputra shareholder includes the 26 year old son of the 2nd Finance Minister. A Chinese 'Ali Baba' partner has managed to secure a substantial oil and gas contract which will be injected into a listed vehicle. A general offer will be made for the listed vehicle – in effect providing a backdoor listing. They can cream off even more.