The Naza Group, founded by the late “AP-King” Tan Sri Nasimuddin Amin, has built very successful businesses ranging from automotive and manufacturing to properties and hotels, on the foundations of its lucrative automotive business.
All of these businesses are privately held by his family, and are now helmed by his five children, in particular his three sons, Datuk Sheikh Mohd Faisal, Sheikh Mohd Nasarudin and Sheikh Mohd Faliq.
Nasimuddin and his children have been very successful in their private ventures, especially in motor and property development, even though it is a relatively new player in the latter.
However, they have not had much luck in gaining control of listed companies. As such, the family’s wealth continued to be shrouded in secrecy and their names are mostly absent from the “billionaires” list of Forbes or other business magazines.
It is not that Nasimuddin did not want to go public.
He had wanted DRB-Hicom Bhd but faced intense competition from Tan Sri Syed Mokhtar Al-Bukhary in 2004 for a controlling block in the automotive group which then belonged to the estate of Tan Sri Yahaya Ahmad and two other vendors, who included Yahaya’s associate, Tan Sri Mohd Saleh Sulong.
The competition became a media war, caused in part by the divided opinion among the vendors on who to sell to, and the pressure among the two tycoons to show that they could still pull strings under the country’s new leadership then helmed by Tun Abdullah Ahmad Badawi.
It was a close call, with the tussle for DRB-Hicom ending only when the Prime Minister’s Office issued a letter endorsing Syed Mokhtar’s bid over Nasimuddin’s because the former had offered a slightly higher price.
After the failed bid for DRB-Hicom, Nasimuddin had planned to float Naza’s automotive distribution and assembly operations on Bursa Malaysia in 2006 via an initial public offering (IPO), while keeping the imported car business private. It was reported then that CIMB Investment Bank had received the mandate for the IPO exercise. But somehow the IPO plan did not take off.
Interestingly, in the later part of 2006, Nasimuddin and Syed Mokhtar were again rivalling each other — this time for a much bigger prize — to acquire the government’s 42.7% stake in Proton Holdings Bhd owned through Khazanah Nasional Bhd.
Nasimuddin
Nasimuddin had reportedly come out with a bidding price of RM2.1 billion for Proton. To show what he could do with Proton, he had even shown sketches of cars to journalists which he said could be new models for Proton if he took over the national carmaker.
But as Proton ended up not for sale, Nasimuddin’s wish was again dashed. And there went his last quest for control of a listed automotive group. In early 2008, the Naza Group planned to list its property development arm on Bursa Malaysia with an estimated market capitalisation of RM850 million. However, the plan was shelved as Nasimuddin suddenly died of cancer in May, and a few months later, the subprime mortgage crisis erupted in the US.
After Nasimuddin’s demise, his young sons, Faisal, Nasarudin, and Faliq, and daughters Nur Nadia and Nur Diana took a firmer grip on the various businesses of Naza Group. Faisal and Nasarudin both became co-chairman of the Naza group of companies, with the former running the imported car business and the latter in automotive assembly and distribution. Faliq runs the group’s property business while Nadia and Diana manage the hotels, food and beverage business.
The Naza Group continues to remain in high profile without Nasimuddin’s presence. Pictures of his children, notably Faisal and Nasarudin regularly appeared in newspapers, showing them with Prime Minister Datuk Seri Najib Razak at various business functions. Publicity for Naza reached a new height in September 2009 when it announced that it became a F1 team owner together with Datuk Seri Tony Fernandes of AirAsia.
Enter Jetson, and exit?
Faisal
In August 2009, Nasarudin and Faliq made corporate headlines for the acquisition of a 33.2% block (now diluted to 28.9% after placement of new shares) in construction outfit Kumpulan Jetson Bhd for RM12.3 million and then made a general offer for the company. The value was small but it made Jetson the first listed vehicle for the family. It was understood that the brothers wanted to spearhead the Naza Group’s property development ventures through Jetson.
The takeover had sparked a rally in Jetson’s stock price, from 50 sen in June 2009 to as high as RM3.00 in November 2009. There was huge excitement on the stock as Jetson and Naza TTDI had entered into a 49:51 joint venture to carry out the planning, design and construction of the new RM800 million Matrade Centre off Jalan Duta as well as the development of the 62.5 acres of land under Naza’s land-swap arrangement with the government.
In January 2010, Jetson had also formed a 60:40 joint venture with China State Construction Engineering (HK) Ltd to submit a tender invited by Naza TTDI for the proposed development of the RM4 billion “Platinum Park” project in Jalan Stonor, Kuala Lumpur. Both the Matrade Centre and Platinum Park projects, which were initiated by the Naza Group, were mega projects for Jetson.
But a year after the two Naza brothers had bought the stake in Jetson, they reportedly had a fallout with Jetson’s management, and are believed to be pondering an exit from the construction outfit, which their vehicle Superior Pavilion Sdn Bhd owns a 28.9% stake.
Jetson had in August mutually terminated the joint venture with China State Construction for the construction of Platinum Park. A month later, it received a letter from Naza TTDI to terminate the joint venture to co-develop the Matrade Centre project. These raise speculation that the Naza brothers may exit Jetson.
If the Naza brothers do exit Jetson, the Naza Group would be without a listed vehicle again to undertake their property development ventures.
Their options would be either to take over another listed company, list the property arm on its own or continue to stay private.
Keeping the businesses private, be it the property or automotive operations, does have its merits. The family gets to retain the full share of profits and could avoid strict rules and corporate governance standards imposed on public-listed companies.
However, such merits apply only when the businesses are self funded and do not require huge financing needed for expansion.
The Naza Group has been able to expand its businesses without resorting to IPOs and capital market financing all these years because it runs a successful and lucrative imported car business. The proceeds from this business in turn have funded the group’s expansion and diversification into property and other operations.
But is this business still going to be as lucrative as ever?
The Naza Group is said to have a dominant market share in the imported car segment due to its sizable allocation of Open APs (Approved Permits) from the government, which dates back since the 1980s. The number of Open APs the group was allocated was envied by many and had even won the late Nasimuddin the unwanted moniker of “AP King”.
But the Open AP is soon to be a thing of the past. The government had said last October that it would discontinue the Open AP system beyond 2015, in the spirit of free trade. It is not known what new systems would be in place to replace the Open AP, but surely, the government wouldn’t want the new system to be seen as a money-minting franchise.
This could potentially mean a less lucrative imported car business for the Naza Group, which is why it had in the last few years started to ramp up its investments in the mass-market vehicle segment by securing more vehicle franchises and expanding its dealerships and service centre network. Other than expanding its automotive operations, the group had also diversified and gone big into property development in recent years, with the Matrade Centre and the Platinum Park projects being two of its biggest.
But unlike the automotive division where Naza already has the necessary infrastructure, such as the assembly plants in place, which means minimal further capital expenditure, its property projects run into billions of ringgit, which may require funding for development and expansion.
In a nutshell, having a listed arm to spearhead the group’s huge ambitions in property development is a feasible move. As a major shareholder in a listed company, the family will remain in control, retain part of the construction margins and property development profits, and more importantly, obtain access to more financing options via the capital market and spread the risks of undertaking major multi-billion ringgit property projects in a cyclical sector.
With a listed vehicle, the family could also institutionalise part of their wealth and be enrolled into the annals of corporate Malaysia. This was something dreamed of by the late Nasimuddin, but sadly was not achieved during his lifetime.
Nasimuddin’s children are now carrying on his dreams and bringing the Naza Group to greater heights. Even if they do eventually exit Jetson, it is likely that it will be just a matter of time before the Naza Group finds another more suitable listed vehicle to house its projects and build its dreams.
Written by Siow Chen Ming
This article appeared in The Edge Financial Daily, September 20, 2010.
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