Thursday, July 15, 2010

Jetson boardroom tussle brewing?

Kumpulan Jetson Bhd’s shares tumbled yesterday amid fears of a boardroom tussle, as the company temporarily halted trading of its shares to announce the surprise retraction of a director’s earlier resignation.

The counter tumbled 22 sen, or 16.5%, to close at the day’s low of RM1.11, after it announced the hour-long trading halt from 9am. The company’s loan stocks did not fare any better, falling 32 sen, or 22.4%, to close at RM1.11 as well, while its warrants fell five sen, or 11.6%, to 38 sen.

ALL’s NOT WELL AT JETSON? Seen here are its incumbent board members: (From left) Datuk Dr Ong Ah Soon, Datuk Teh Kian An, Sheikh Mohd Faliq Sheikh Mohamad Nasimuddin, Sheikh Mohd Nasarudin, Isnin Rahim, Mohd Najib Abdul Aziz, Louise Paul Joseph Paul and Chow Chee Kin

According to sources familiar with the company, fears abound that a boardroom tussle may be brewing.

In an announcement yesterday, Jetson said an independent director, Mohd Najib Abdul Aziz, had retracted his resignation that was announced to Bursa Malaysia Securities about a week ago on July 7.

Jetson said a board meeting scheduled for today “will also now discuss the implications of Mohd Najib’s resignation and retraction”.

“Where required, a further announcement on this matter will be made after the board of directors’ meeting,” Jetson said.

A feud is understood to be brewing between the sons of the late Tan Sri SM Nasimuddin SM Amin (of Naza Group fame), namely Jetson’s chairman and executive director Sheikh Mohd Nasarudin and his brother, vice-chairman andexecutive director Sheikh Mohamad Faliq Sheikh Mohamad Nasimuddin Kamal in one camp, and another faction led by Datuk Teh Kian Ann, Jetson’s managing director.

Teh has about 3.78% equity interest in the company, after selling a large chunk of his stake to the Naza brothers in August last year.

While he has ceased to be a substantial shareholder, he is no pushover.

About 52.2% of Jetson’s irredeemable convertible unsecured loan stocks (ICULS), which mature in late November 2012, are held by KK Tee Holdings Sdn Bhd and Tee Keng Kok, who was a founder of Jetson with Teh.

Tee had resigned from Jetson’s board last October, possibly to facilitate the entry of the Naza brothers.

Based on his long-standing relationship with Tee, Teh can still garner enough clout to pose a threat to the brothers.

Apart from his 3.8% equity in Jetson’s ordinary shares, Teh also owns 3.2% of the ICULS and 3.5% of the warrants outstanding.

Jetson has 60.59 million shares in issue. According to Jetson’s latest annual report, there are some 4.35 million ICULS issued, and about 17 million warrants, which if converted could further dilute the shareholding of the Naza brothers.

The largest warrant holders are Mohamad Mazril Musa who has 1.5 million or 8.82% of the warrants outstanding, and Tong Yun Mong who has some 1.38 million warrants, or 8.12% of the issued derivatives. It is not clear who these individuals are, or if they are aligned to any party.

The number of ICULS and warrants owned by Tee and Teh could be converted to a total of 2.8 million ordinary Jetson shares, or about 4.4% of its adjusted enlarged capital.

A full conversion of all outstanding ICULS and warrants, however, could enlarge Jetson’s fully diluted share base by a hefty 35% to 81.9 million shares. Thus, the holders of the company’s ICULS and warrants could play a pivotal role in any potential drawn-out boardroom tussle.

The ICULS, which have a coupon rate of 5% and expire in November 2012, are convertible into new ordinary shares at any time until the maturity date, at a conversion price of RM1.08. The warrants also expire in November 2012 and have an exercise price of RM1.08.

At present, the Jetson board is made up of the two Naza brothers, Teh, executive directors Chow Chee Kin and Isnin Rahim, a recently appointed independent and non-executive director, Foo Lee Khean, and independent, non-executive directors Datuk Ong Ah Soon and Louise Paul Joseph Paul.

The two brothers and Chow had joined the board at the same time, in late November 2009.

Sources said it may be an evenly matched fight, in terms of board representation, although less so in terms of shareholding.

Issues are understood to have surfaced after Chow raised his shareholding in the company. Chow had, on April 27, acquired some 1.6 million shares or about 2.6% equity interest in Jetson at RM2 a share.

He acquired a further one million shares on May 10, also at RM2 apiece, nudging his shareholding up to 2.6 million shares or almost 4.3%.

Privately held Superior Pavillion Sdn Bhd, the vehicle of the Naza brothers, has about 28.9% shareholding or 17.5 million shares, while Kumpulan Jetson Provident Fund controls 3.4% equity or almost 2.1 million shares in the company. Nasarudin also has almost 0.3% directly in his name. This was gathered from the company’s annual report for 2009.

Certain quarters were of the opinion that a mandatory general offer was triggered as Chow’s and the brother’s shareholding add up to more than 33.3%, even without the staff provident fund’s shares.

The Edge weekly, in an article in mid-June, had suggested that Jetson clarify the issue of whether Chow and the brothers were parties acting in concert.

In a subsequent announcement to Bursa Malaysia, Jetson had stated that Chow and the brothers were not acting in concert.

However, it is understood that the Securities Commission is looking at the issue and will decide whether the parties were indeed acting in concert, and whether a general offer was triggered.

It is learnt that although Jetson had made a statement that Chow and the two brothers were not acting in concert, some of the directors of the company may have felt otherwise. It is also alleged that Chow could also have possibly breached a creeping rule preventing directors from accumulating more than 2% equity interest in a six-month timeframe.

It is not clear what impact this feud may have on Jetson’s construction jobs, some of which hinge on the Naza Group’s strong political connections.

Late last year, Jetson had announced that it had entered into a shareholders’ agreement with TTDI KL Metropolis Sdn Bhd, which is wholly owned by Naza TTDI Sdn Bhd, to plan, design and construct the proposed billion-ringgit Matrade (Malaysia External Trade Development Corp) Centre in Jalan Duta, Kuala Lumpur.

Naza TTDI is the property arm of the Naza Group. The Matrade redevelopment is the biggest recent coup for the group. The deal involves the privatisation of 65 acres of prime land in the Dutamas area in return for building a new convention centre valued at RM628 million, on 13.1 acres within the site.

Naza had stated it planned to undertake a RM15 billion development there, spread over 10 years, a plum task the construction of which was handed to Jetson.

Written by Jose Barrock
This article appeared in The Edge Financial Daily, July 15, 2010.

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