Jan 31 2007
From the start, I do not think Rashid Hussain Bhd (KLSE : RHB, stock-code 1309) will have a smooth sailing in order to put its’ messy massive debts in place. Since the 1997 Asia Economy Crisis, most of Malaysian banks which were over-exposed to U.S. denominated debts drop like a dead-corpse. Utama Banking Group (KLSE : UBG, stock-code 6831) thought that it managed to secure a cash-cow in RHB using political strength in the form of Sarawak Chief Minister Abdul Taib Mahmud whose family controls Cahya Mata Sarawak Bhd which in turn controls UBG.
There’s a saying “Don’t bite off more than you can chew” – the worst is to mix politics with business which historically has been proven not to work. What more if you put your second son who is without REAL corporate experience in managing one of the largest bank in Malaysia. What will you get as a result? An almost guaranteed of failure from the highest level of corporate decision making to the lowest level of daily operations. Some of Malaysian corporate entities seems to not understand that its’ better to leave the running of a company to the professionals. On Tuesday, the Star reported Employees Provident Fund (EPF), which owns about 31 percent of RHB Capital’s controlling shareholder, RHB, has put the plan to other owners of the parent holding company to sell RHB Capital shares to RHB at a discounted price of 3 ringgit per share in order to clean up its books and pave the way for a takeover by Kuwait Finance House ( KFH ).
However, today, Business Times was told that UBG is not in favor of the plan, as the timeframe to undertake it could weaken Utama’s hand at the negotiation table should there be hiccups midway. EPF wanted its’ proposal to be concluded before June 2007, when some of RHB’s paper issue debts are due, and possibly affect the standing of RHB Capital (KLSE: RHBCAP : stock-code 1066). RHB has RM1.58 billion of debt due between June 30 and December 31 this year. Utama Banking owns 32.5 percent of Rashid Hussain and the fund owns about 31 percent.
It would be fun to see if this will translate into a long-battle between the two giants – which I doubt so. Money talks and it all boils down to dollars and cents. Will they learn the true meaning of business? Will these folks grow-up and mature enough to not repeat the same mistake of mixing political and business the way western countries practices? What about the case of RHB founder Tan Sri Abdul Rashid Hussain and five other individuals who are being sued by RHB Capital? Will the case disappears over the time?
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January 31st, 2007 by financetwitter
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