Halim Saad Seeks Adequate Compensation for UEM and Renong Mess
KUALA LUMPUR, 3rd November 2023: On the 2nd August 2023, Tan Sri Halim Saad filed a suit at the High Court about the takeover of UEM and Renong by the government and named Dr Mahathir Mohamad, Tan Sri Nor Mohamad Yakcop and the government as defendants.
The plaintiff is seeking a court declaration that the government was obliged to provide him with adequate compensation within the meaning of Article 13 of the Federal Constitution.
Halim also seeks compensation from the government as well as exemplary and aggravated damages.
Checking out PLUS’ financial report as of 31st December 2016, PLUS’ total assets were at RM33.22 billion. For its financial year ended December 2016, the group registered a profit after tax of RM288.2 million and RM4.07 billion in revenue.
In “The Reply to Defence” dated 30th October 2023, Tan Sri Halim Saad claimed he had no choice but to abide by Tun Dr Mahathir Mohamad’s directive to abandon his plan for the acquisition of United Engineers Malaysia (UEM) and disposed his shares in Renong Bhd two decades ago.
The 70-year-old entrepreneur claimed he was not given any option or choice in his meetings with the then prime minister Dr Mahathir and former minister Tan Sri Nor Mohamed Yakcop between July 12 and July 17, 2001.
On 6th October 2023, the defendants contended that Halim willingly disposed of his shares in Renong with compensation totaling RM165 million.
Complaints against Halim Saad
The defendants claimed that under the plaintiff’s management, Renong Group’s market capitalisation declined by 41% from RM7.2 billion in 1997 to RM4.2 billion in 2000.
“At a material time, the entire Renong-UEM group of companies comprised a significant portion of the Kuala Lumpur Composite Index.”
“Under the management of the plaintiff (Halim), the market capitalisation of the Renong Group declined by 41%, from RM7.2 billion in 1997 to RM4.2 billion in 2000,” the defence read.
“Their weak performance has had a negative impact and burdened the overall stock market.
“To rectify the situation, Dr Mahathir agreed with Nor Mohamed’s suggestions to restructure both Renong and UEM,” claimed the defendants.
However, Halim argued that the government had not in any way paid any compensation to him.
“The plaintiff (Halim) denies that he voluntarily gave up his said property rights on the understanding that he would not receive fair compensation or that the sum of RM165 million paid to him was compensation for the said acquisition.
“The RM165 million received by the plaintiff from Khazanah was to compensate him for having paid RM100 million to UEM in connection with the Put Option which the government then requested UEM and Halim to let lapse.
“The payment also to compensate the plaintiff’s losses due to the foreclosure of various assets pledged by him to various financiers for the purpose of financing the said RM100 million,” he claimed.
The 1997 Asian Financial Crisis
Halim pointed out that the losses incurred by UEM and Renong during that period were due to the 1997 Asian Financial Crisis, political instability, and government’s interference in economic matters.
“The Kuala Lumpur Stock Exchange was adversely affected at that time due to the 1997 Asian Financial Crisis and the monetary policies put in place by Dr Mahathir which had the effect of isolating the country, in particular from foreign investors.
Instead, he said the then prime minister should be blamed for aggravating the adverse impact of the financial crisis.
He referred to the slew of policies implemented by the Mahathir administration to contain the 1997 crisis, such as the artificial peg of the ringgit at 3.80 to the US dollar, the restriction on companies declaring and paying dividends, and the shutting down of offshore ringgit transactions.
Halim also mentioned the political instability caused by the arrest and subsequent prosecution of the then deputy prime minister and finance minister, Anwar Ibrahim.
“The said incident and events preceding it, including the 1988 attack on the Judiciary, gave rise to an impression that the government was not concerned with the rule of law.
“It was also perceived that there was interference by the federal government in economic matters, with the deployment of government-controlled public funds being seen as a bail-out for some politically well-connected and influential persons,” he claimed.
Adequate compensation sought
Halim claimed these matters made Malaysia unattractive to foreign investors, resulting in a sharp decline in foreign direct investments in the country.
The plaintiff is seeking a court declaration that the government was obliged to provide him with adequate compensation within the meaning of Article 13 of the Federal Constitution.
Halim also seeks compensation from the government as well as exemplary and aggravated damages.
Halim’s takeover of Renong attempt
During the peak of the 1997 Financial Crisis, a Put Option (right to sell) was granted by Halim to UEM in the wake of cash-rich UEM’s purchase of a third of its parent, Renong, at the inflated price of RM2.34 – using up RM2.34 billion of its cash.
There were many sceptics that did not seriously believe that Halim would be able to honour the Put Option, if UEM exercised it.
The payment terms of the Put Option that Halim agreed to pay were as follows;-
- RM100 million on 14th February 2001;
- RM100 million on 14th July 2001;
- RM100 million on 14th December 2001; and
- The balance together with accruing interest on 14th April 2002.
Making the deadlines
The 1st RM100 million was duly paid. According to an informer close to Halim, the businessman also had planned for a general offer (GO) for UEM after the GO of Renong. However, on the 12th of July 2001, before the deadline for the payment of the 2nd tranche, the transactions were stopped.
Halim argued that he had the financial support from Credit Suisse to complete the Put Option/GO but he was told not to proceed. Credit Suisse was accommodative to Halim as they understand the value of UEM’s jewel, ie the North-South Highway concession is much more than the exercise price of the Put Option. When Halim objected to the demands of certain individuals, instructions from high above were given to the UEM board not to allow Halim to proceed with the Put Option or the GO.
Halim was also advised not to go against the wishes of the people in power and to accept the terms of the transaction.
Halim’s action of not proceeding with the Put Option or GO has always been misinterpreted by the public as a bailout by the government. It is a matter of fact that under no circumstances did Renong Group, (which was under Halim’s control) require any bailout by the government, the source said.
Renong management was sound under Halim leadership
Halim, however, denied the defendants’ contentions and asserted that his management of Renong had been sound.
The Renong group under his management, he said, was one of the most successful Bumiputera-owned groups prior to the government takeover.
“Out of the six Bumiputera-controlled companies in the top 30 listed companies (by market capitalisation) in 2001, half were controlled by the group,” said Halim.
Debt level sustainable
The defendants highlighted that Renong had a debt totalling RM26 billion during the peak of the 1997 Asian Financial Crisis, which constituted 7% of the entire banking system at the time.
Halim, however, argued that the debt level was manageable in spite of its large magnitude.
“Though Renong had large debts, the Corporate Debt Restructuring Committee (CDRC) had expressly indicated that the debt-restructuring could be carried out without any financial support from the government,” he said.
The CDRC was set up by the government following the 1997 crisis to help companies work out feasible debt restructuring with their creditors without having to resort to legal proceedings.
“Further, the CDRC had stated it was confident that significant value could be extracted over the coming years from Renong’s asset portfolio,” he said.
At the time, Renong’s portfolio included Commerce Asset-Holding Bhd (now CIMB Bank), Ho Hup Bhd, Kinta Kellas Bhd, Cement Industries Malaysia Bhd, Pharmaniaga Bhd, Time Engineering Bhd, Time dotCom Bhd, ParkMay Bhd, Faber Bhd, Crest Petroleum Bhd, EPE Bhd and Intria Bhd.
All of these companies were listed on the stock exchange.
“Under the CDRC’s proposed scheme, Renong’s debt was ultimately resolved via the issuance of RM8.4 billion bonds by PLUS in September 1999 which were given an A3 rating from RAM Ratings.
“This rating was maintained in November 2001 with PLUS having a net present value (NPV) cash flow of RM25 billion. These were indicative that PLUS was not in financial distress,” he said.
The sale of TIME?
The Time Group Debt was stand-alone and not part of the PLUS/ PLUS SPV Bonds. Thus, any failure would not have affected the group. A few days after signing, Halim was told again to abort the sale of 20% of Time DotCom to Singapore Telecom (Singtel) for RM1.67 billion indicating that the total value of Time DotCom was RM8.34 billion.
Further, the 15% shareholding in Time was being offered for RM0.649 billion. In the end, Time had to accept an offer from Khazanah for RM3.4 billion less. From what Halim saw, neither Khazanah, Renong, UEM nor Time was interested in the offer. Khazanah already had Telekom Malaysia in their stable.
Halim did not like the offer because Khazanah lacked the relevant expertise and a partnership would not enhance the share price. Had they been sold to Singtel, Halim could have reduced the group’s debt significantly and further unlocked more potential for Time DotCom as Singtel could have brought value to Time DotCom in terms of expertise and skills to grow the business.
On 9th May 2003, Star Online reported that Maxis Communications Bhd formally completed its RM1.47 billion acquisition of mobile operator TimeCel Sdn Bhd from Time Dotcom – relatively very cheap compared to the price offered by Singtel.