Dr Yu’s elusive deal
Savvy investor may be looking at institutional partner in his long running bid for PM Securities
LOW-PROFILE businessman Datuk Dr Yu Kuan Chon may have had some spectacular wins in the corporate world with his stock picks, but for more than two years, he’s been trying to secure a deal which would pave the way for him to build his own stockbroking company. Alas, that plan has been hitting a brick wall.
So while Dr Yu has etched his name with his speculator play in blocking the privatisation of Hong Leong Capital Bhd (HLCap), it is his pursuit of Pan Malaysia Holdings Bhd (PM Holdings) which is newsworthy these days, and for a few reasons too. One, if Dr Yu is successful in buying a controlling stake in PM Holdings, he will gain control of stockbroker PM Securities Sdn Bhd (PM Securities) and pave the way for the newest name in Malaysia’s stockbroking world.
Sources say that Dr Yu is very keen on building the stockbroking business of PM Securities, banking on the fact that in the long run, the local market would have a higher retail participation.
“He’s a genuine buyer and he’s really keen to get into this business at a time when most people are shunning it (stockbroking),” says a banker.
The deal was first announced in Dec 12, 2014, when PM Holdings said that its parent Malayan United Industries Bhd (MUI) had inked a deal to sell its close to 70% stake to Dr Yu for RM77.12mil cash. This price works out to 12 sen per PM Holdings share.
Prior to that, he had already accumulated some shares in PM Holdings and so he will end up with at least 74% of the company following the completion of the deal.
Dr Yu would also be obliged to extend a mandatory offer for the remaining shares of PM Holdings. He had said previously he intended to keep the stock listed.
MUI, which is the flagship of one-time corporate high-flyer Tan Sri Khoo Kay Peng, says the deal is a move to divest its non-core assets and reduce its bank borrowings ( see sidebar).
But since then, the deal has hit a roadblock in the form of getting an approval from the Securities Commission (SC). Based on filings from PM Holdings from May 11, 2015, it has been revealed that the shareholder changes of PM Securities (which is wholly owned by PM Holdings’ 34.8% associate Pan Malaysia Capital Bhd) had not been approved by the SC. Since then, the deal has seen numerous extensions between Dr Yu and PM Holdings. Reading between the lines of the announcements, it is clear that the SC has yet to give the approval for Dr Yu to become the new controlling shareholder of PM Securities.
According to stock exchange filings, PM Securities had submitted a new application to the SC for the change of controlling shareholder in December last year and is still awaiting the outcome.
It is unclear why this is the case, although sources reckon that a solution is being sought to meet the regulator’s requirements.
One theory is that the regulator has a preference for institutions to now become new major shareholders of financial services licence holders. This in turn feeds into market talk that Dr Yu is actively seeking to partner with a foreign financial institution to become a part-shareholder in PM Securities. Another notable fact is due to the liberalisation moves by the authorities, foreign ownership limits for stockbroking firms have been raised to 70% from 49% previously.
This in turn explains recent merger and acquisition talks involving shareholding changes at Apex Equity Holdings Bhd. Late last year, StarBizWeek reported that Apex had received interest from a fairly large China-based firm involved in the stockbroking industry, but nothing has been firmed up.
“There have been some foreign institutions which had begun discussions with Dr Yu,” says a source.
Meanwhile, Dr Yu has been given several extensions to fulfil the condition precedent to the deal, the latest cut-off being April 11, 2016.
PM Holdings is primarily involved in the hospitality industry through its wholly owned beachfront hotel, Corus Paradise Resort Port Dickson. Its exposure in financial services is through PM Securities, which is a universal broker offering retail share trading, institutional share dealing, corporate finance and advisory services, among others. It also has a fund management unit, PCB Asset Management Sdn Bhd.
In other words, the SC’s approval only relates to the shareholding changes in PM Securities and has no bearing on the sale of the hotel asset to Dr Yu.
One possibility is that Dr Yu could carve out the financial services assets from the deal. That, however, would mean that he would pay a