EONCap’s substantial shareholder and board member Rin Kei Mei told the High Court yesterday that his adviser Tengku Zafrul Aziz had informed him in 1H09 that Khazanah wanted to sell its stake in EONCap and was then in communication with HLBB.
“He (Zafrul) told me that initial indication from HLBB (through its communication with Khazanah) was RM7.10 (per EONCap share). My position and (Datuk Seri) Tiong (Ik King) was that we (also) wanted to sell,” Rin said, adding that he had appointed Zafrul between March to April 2009 to find a buyer for his stake in EONCap after Primus failed to subscribe to a RM655 million bond and warrants issue in the bank as promised.
Zafrul, now Maybank Investment Bank’s CEO, was a former group director at K&N Kenanga, the local investment bank that was appointed as adviser to Rin to advise him on HLBB’s proposed offer.
During the court hearing, Primus’ co-counsel Ranjit Singh questioned Rin whether he had already reached an understanding with HLBB to sell his EONCap share at RM7.10 apiece, prior to Bank Negara Malaysia (BNM) giving its approval on Dec 17, 2009 for the relevant parties to commence negotiations.
“That is through Khazanah… you should ask them. Khazanah told me (about the price), I accept… EPF also accepted,” said Rin. He added that until today, he “had not met” HLBB’s chief Tan Sri Quek Leng Chan and maintained that it was Zafrul, in his adviser capacity, who had conducted all the discussions in 2009 with HLBB prior to the BNM approval.
Rin arriving at the Jalan Duta court for the hearing.
Wearing a grey suit, Rin later clarified that he thought the RM7.10 price was low but nevertheless, it was “still negotiable”. He also noted that Quek had once approached him in 2004 to buy his stake in EONCap at RM7 a share. “I will never accept anything below RM7,” Rin said.
When asked why he did not disclose to EONCap’s board that Zafrul was in talks with HLBB on behalf of him, Rin said: “it’s not necessary.”
Ranjit also quizzed Rin at length concerning the new board of directors in EONCap. To reiterate, Rin had called for an EGM, which was held on March 15, to vote in seven new directors after the previous board rejected HLBB’s first proposed offer of RM4.92 billion or RM7.10 per share.
Rin clarified that he wanted the old board to stay on, saying that he intended to nominate additional new members into the board so that they could take a fresh approach to the issue.
“Out of the [present] eight directors, I only knew two — Gooi [Hoe Soon] — who was already a director of the bank and [Ahmad] Riza [Basir] … who is my friend Tan Sri Basir’s son,” he said, adding that he wouldn’t be able to recognise the rest even if he “had met them on the street”.
On that, counsel noted that HLBB’s first offer of RM4.92 billion or RM7.10 per share had lapsed by then. “How to take a fresh approach when the issue was already dead?” Ranjit asked.
Rin replied: “I thought HLBB would come back.”
True to Rin’s guess, HLBB returned on April 1, with a cash offer for the assets and liabilities of EONCap for RM5.06 billion or RM7.30 per share.
During the cross examination, Rin also clarified that he was not in a rush for the RM7.10 per share offer and that he had tried to look for other buyers. “But at that time, the only offer we had on the table was HLBB. We had no other choice. Now it’s up to the shareholders to decide. It’s not for the board to decide,” he said.
He also stated his belief that the board of directors should not reject the RM7.10 offer but instead pass it to the shareholders for approval. “Even if shareholders approve it, it will still need to go back to the board… and they can reject it after… the board will have final say,” he added.
After about five hours of questioning, Ranjit concluded his cross examination at 4.21pm and Primus’ leading counsel Datuk Loh Siew Cheang took over. Loh questioned the plans for EONCap after the proposed sale of the banking group’s assets and liabilities.
“There are no plans to maintain the listing status… just take the cash?” Loh asked.
“Yes. I want the cash,” Rin replied.
Loh then questioned that if Rin and other substantial shareholders who had wanted to exit passed the resolution for the proposed sale, what option would be left for the others? Rin said they would distribute the proceeds.
Then at 4.45pm, counsel from Gananathan Loh took over the cross examination for a short time and ended at 5.03pm. Rin insisted on continuing but counsels from both sides together with Judicial Commissioner George Varughese agreed to stop for the day. The session in court lasted for over six hours. It is scheduled to reconvene at 2pm today.
Rin took to the witness stand yesterday in the suit brought by Primus (M) Sdn Bhd against certain EONCap shareholders and directors. Primus is seeking RM1.12 billion in damages should the proposed sale to HLBB go through.
Primus is the Malaysian unit of Hong Kong-based investment firm Primus Pacific Partners Ltd that holds a 20.2% stake in EONCap. Primus is suing Rin, Tiong and seven other directors of EONCap for alleged breach of their fiduciary duties and contend that they had acted in excess of their powers pertaining to the proposed RM5.06 billion sale of the bank’s assets and liabilities to HLBB.
Rin owns 15.4% of EONCap while Tan Sri Tiong Hiew King has 16.3%. The EPF and Khazanah hold 12.2% and 10%, respectively.
This article appeared in The Edge Financial Daily, October 21, 2010.
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