Tag Archives: Ananda Krishnan

Ties with Lippo had crumbled; TV issue may still go through Indonesian courts

THE sale of a 44 per cent interest in Overseas Union Enterprise (OUE) for $957 million will bring closure to a five-year partnership between two South-east Asian tycoons that went sour. But it is unlikely to catalyse the resolution of any business differences that remain.

On Tuesday, Indonesian James Riady’s Lippo group doubled its interest in OUE, Singapore’s second largest hotel operator, following a deal to acquire an effective 44 per cent from his estranged Malaysian partner T Ananda Krishnan. Lippo paid Mr Krishnan’s privately held Usaha Tegas (UT) group $957 million, or $11 per OUE share.

The price was a reasonable reflection of market conditions, analysts said. But an executive familiar with Mr Krishnan’s style said that the tycoon – considered the second richest man in Malaysia after billionaire Robert Kuok – probably broke even.

‘It’s a wash,’ he told BT on condition of anonymity. ‘UT paid $10.20 a share and then you have to consider three years of financing at 4 per cent. So I’d say they came out even.’

Other analysts said that the deal could have mitigated any downside risk Mr Krishnan might have faced from a possible oversupply of hotel rooms in Singapore in the future. The completion of the integrated resorts (IRs) is expected to add over 4,000 hotel rooms to the island, adding pressure on OUE’s earnings from the increased competition.

Even so, the deal had been brewing for some time. The two partners had disagreements over strategy and the future direction of OUE, and Mr Krishnan’s allies had complained of having little say in the firm’s management. That came atop festering problems that had begun over a failed satellite-TV business in Indonesia.

In fact, two weeks ago Mr Krishnan’s Astro All-Asia Networks won US$230 million from a Singapore arbitration panel in a claim against Lippo in Indonesia. Astro, a listed satellite-TV operator in Malaysia, had written down over RM1 billion (S$419 million) in relation to the Indonesian venture.

The OUE disagreements had been heading that way with the matter already under arbitration in Singapore – over differences in the interpretation of the original shareholder agreement – when the deal was brokered.

The transaction brings to a close a five-year partnership that had initially promised to become a regional powerhouse in telecommunications and property. But it may not be altogether amicable for it does not imply an easy resolution to, say, the Astro award which has to wend its way through the Indonesian courts.

Indeed, for the award to be recognised there, it has to be registered first with Indonesia’s Supreme Court – which isn’t a given. ‘This sale is completely divorced from the Astro award,’ said the executive. ‘For that, Astro has to go through the process, and it has said it will do what it takes.’

The partnership began in 2005 when a joint venture was set up to operate a pay-TV business through a Lippo unit. The business was enmeshed in problems from the start, apparently, but it didn’t seem to stop the partnership from flourishing elsewhere.

Later that year, Maxis Communications, Mr Krishnan’s listed Malaysian mobile phone unit, bought a controlling 51 per cent interest in Lippo’s cellular phone firm Natrindo for US$100 million. The next year, the partners once again joined forces in Singapore to acquire control of OUE for $1.8 billion.

In 2007, Maxis bought out Lippo completely in Natrindo for US$124 million. This happened while there was friction over at the pay-TV business over unpaid services.

The clincher took place two months later when Mr Krishnan took Maxis private in Malaysia’s biggest deal ever. A little later, he brought in Saudi Telekom, which took up 25 per cent of Maxis and 51 per cent of Natrindo in a deal worth US$3.05 billion.

It incensed Mr Riady and, according to some news reports, his allies accused Mr Krishnan of having lined up the Saudi telecom firm before taking over Natrindo. It is a claim that Mr Krishnan’s camp has refuted.

Source : Business Times – 11 Mar 2010

Another chapter closed in troubled alliance; no immediate plans for delisting.

The tenuous alliance between Indonesia’s Riady family and Malaysian tycoon Ananda Krishnan in Overseas Union Enterprise (OUE) has come to an end – at a price of almost $1 billion.

Yesterday, the Riadys’ Lippo Group paid some $957 million to acquire all of Mr Krishnan’s stake – and greater control – in the mainboard-listed property group.

With the deal, Lippo’s direct and indirect interests in OUE rose to 88.52 per cent from 64.67 per cent.

OUE’s free float after the deal will only slightly exceed 10 per cent, putting it at risk of delisting. Nevertheless, Lippo said that it intends to keep the firm listed.

The buyout is the latest display of differences between two of the region’s richest business groups, which have been in legal battle over a failed satellite TV venture in Indonesia. Just last month, Mr Krishnan’s subscription TV group Astro won an award of some US$230 million against Lippo.

The bad blood seemed to have spilled over to the partnership in OUE. Reports noted how the two parties had disagreements over the management of the firm.

Yesterday morning, OUE called for a trading halt in its shares before news of the ownership changes broke. Lippo’s investment unit Golden Concord Asia bought direct and indirect stakes in OUE from Barinal, a unit of Usaha Tegas. Usaha Tegas is Mr Krishnan’s private investment holding firm.

Lippo paid $11 per share for the additional interest. The price represents a premium of 21.7 per cent to OUE’s last closing price of $9.04 last Friday. After trading in OUE resumed later in the afternoon, the counter shot up and closed at $11.98, up $2.94 or 32.5 per cent from Friday.

OUE’s board underwent a reshuffle to reflect the ownership changes. Lippo president Stephen Riady became executive chairman of OUE, a step up from his original role as executive director.

Christopher James Williams, who was OUE’s non-executive chairman, became deputy chairman. At the same time, Barinal’s four nominees to the board resigned, and a new non-independent and non-executive director joined the team.

Lippo, meanwhile, expressed confidence in the growth potential of Singapore’s property market, and said that the deal allowed it to strengthen its asset base here.

‘This transaction is testament to our commitment to Singapore and to being a key player in the vibrant property and hospitality sector here,’ Mr Riady said. ‘OUE will continue to focus on its core business in hospitality, as well as to strengthen its position in the premier retail and commercial space.’

OUE’s portfolio cuts across the hospitality, retail, commercial and residential sectors. It is widely known as the owner of Mandarin Orchard Singapore, the recently revamped Mandarin Gallery and The Grangeford. It is also developing 50 Collyer Quay.

As at December last year, it had some $2.77 billion worth of assets. It posted a net loss of $92.2 million for the full year ended Dec 31, mainly due to fair-value and impairment losses.

OUE was controlled by United Overseas Bank up until 2006, when the latter had to dispose of non-core assets to comply with the Monetary Authority of Singapore’s guidelines. Lippo and Usaha Tegas then joined hands to acquire the property firm for $1.8 billion.

With relationships between the two major shareholders souring, market watchers felt that the latest development could be in OUE’s interests.

According to NUS Business School’s professor of accounting Mak Yuen Teen, having several major shareholders in a company can sometimes be a good thing because they can ‘monitor each other’.

But he also pointed out that the company would not be able to move forward if the major shareholders are not on good terms. In such a case, it would be better to ‘get past hostilities’ and have just one major shareholder.

Another industry insider agreed that the deal could be better for OUE’s development. But he also tried to play down the significance of the buyout. ‘Quite often, people pull out of a company if they don’t share the same vision. . . It’s just about business.’

Source : Business Times – 10 Mar 2010