Ghost of Renong haunts govt

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In this first part of a series, KiniBiz looks at former corporate kingpin Halim Saad’s billion-ringgit legal suit against former Minister in the Prime Minister’s Department, Nor Mohamed Yakcop, the Government and Khazanah Nasional, which has set the stage for an old can of worms to be reopened. The case sheds some light on what goes on behind closed doors in corporate Malaysia, and the close nexus between the government and business.     

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“I have nothing to say, but I pose three questions,” former head honcho of the UEM-Renong group said, referring to the suit amounting to over RM2 billion he filed against a former minister in the prime minister’s department, Nor Mohamed Yakcop, the government and government investment agency, Khazanah Nasional.

“Who did the assets belong to? (Halim denied strenuously that the assets belonged to Umno). Why did they (Nor Mohamed, the Government and Khazanah) stop me from making a general offer and going ahead with the put option?

“And who stopped me from making a general offer and going ahead with the put option?” he asked.

Halim was referring to the put option he granted to United Engineers (M) Bhd in January 1998 which gave the company the right to sell back 32.6% of Renong shares back to him at RM3.24 a share or RM3.2 billion.

This was the price at which UEM had earlier acquired the shares, causing a public outcry and accusations that Halim was using UEM to save himself and other shareholders by supporting Renong’s share price at a time when the market was plunging in the wake of the Asian financial crisis.

Unlawful and fraudulent

Since late last year there had been murmurs in the marketplace that Halim would be taking the government to court, alleging that state-controlled investment arm Khazanah Nasional Bhd’s takeover of his companies, Renong Bhd and United Engineers (M) Bhd (UEM) and related assets, was unlawful, and fraudulent.

Then two months ago, in mid-April, it happened, he filed the suit.

Halim in his statement of claim said that he was fraudulently induced to sell Renong and UEM, and gives details of what he alleged happened, resulting in his legal suit.

Halim is claiming RM1.8 billion in compensation for him giving up his companies and losses from the rescue of Fleet Group and Fleet Holdings, general damages for a breach of purchasing his 16% of Renong for RM465 million, damages for fraudulent misrepresentation, interest, cost and any other relief deemed proper.

Four-cornered circle

The actual events leading up to the legal suit started in November 17, 1997, when UEM acquired 722.88 million shares or 32.6% in Renong for RM2.3 billion or RM3.24 per share.

(This acquisition raised many eyebrows, and many facets of the deal were never really explained. Read about it tomorrow).

Halim was the largest shareholder of UEM with a direct 16% stake or 372 million shares.

In January 1998, Halim in his personal capacity offered to buy UEM’s block of shares in Renong via a put option. In an extraordinary general meeting on Valentine’s day 1998, UEM’s shareholders approved the acceptance of the put option, making it exercisable by UEM at any date between March 1, 2000 and Feb 28, 2001.

Then in late 2000, UEM exercised the put option at a price of RM3.16 billion, payable in four tranches, with Halim agreeing to pay RM100 million in three instalments — mid-February, July and December 2001– and the remainder paid with interest on May 2002.

According to the suit, Halim paid the first instalment in February 2001, but by mid-2001 was contemplating buying over the remainder of UEM, via Renong in a general offer, which was an alternative to completing the put option.

However in July 2001, Halim was summoned by former premier Mahathir Mohamad, to the latter’s office in Putrajaya.

“During this meeting, Mahathir informed the plaintiff (Halim) that he should allow the government to take over his (Halim’s) shareholdings in the Renong and UEM group, and in that connection asked him to meet Nor Mohamed, his Special Economic Adviser,” Halim’s statement of claim reads.

In meetings with Nor Mohamed on July 12, and 17 of 2001, Halim was advised against proceeding with the put option, and to shelve his general offer plan for UEM, and that the government’s vehicle to take over the companies would be Khazanah.

Accompanying Halim in these discussions was Rashid Manaf, his solicitor (with Rashid & Lee, and later chairman of SP Setia for many years).

Halim on July 16 the same year, had written to Mahathir, to reconsider his position and as an alternative, set his own terms for him to exit both Renong and UEM.

The terms proposed by Halim for him to exit include a payment of RM1.3 billion in cash and kind — RM325 million in cash, RM325 million in cash equivalents and the balance RM650 million via land within the Prolink development in Johor, now part of Iskandar Malaysia.

Secondly that Khazanah acquire Halim’s 372 million shares or 16% in Renong, at RM1.25 per share or for RM465 million.

Next that Kualiti Alam Sdn Bhd, a waste management company be transferred to Halim, free from all encumbrances, as a settlement for Halim rescuing Umno linked Fleet Group and Fleet Holdings. According to suit the rescue cost RM508 million.

Halim had also requested that Pharmaniaga Bhd be sold to a senior executive of Renong, to be nominated by him, and sought to be released from any liability in respect of the put option. The suit suit calls this the 2001 agreement.

As for the RM100 million Halim had already paid — the first instalment of the put option — either Khazanah or UEM were slated to repay Halim, after Khazanah’s general offer of UEM and Renong were completed.

Nor Mohamed and Halim reached a consensus on the repayment of the RM100 million between July 2001 and June 2002, as a separate agreement to the 2001 agreement.

Halim thus supported the general offer by Khazanah’s unit Syarikat Danasaham Sdn Bhd, and in due course resigned as executive chairman of Renong and related companies, after shareholders of Renong agreed to sell the company’s 37.1% in UEM to Khazanah, under the general offer.

Khazanah’s general offer was completed on Oct 8, 2001.

Deal goes sour

Halim wrote several times to both Mahathir and Nor Mohamed seeking the performance of the 2001 agreement, and that the compensation in the form of Prolink land, be settled via cash instead.

The plaintiff also met up with Mahathir on June 2, 2002 and Nor Mohamed on August 10, 2002 seeking the performance of the terms of the 2001 agreement.

In May 2003, Khazanah repaid the RM100 million which was one instalment of the put option and an additional RM65 million as compensation for losses arising from the foreclosure of several assets pledged by Halim to various financiers.

Shortly after this RM165 million payment, Halim met Nor Mohamed who orally agreed that the defendants would perform their obligations under the 2001 agreement, the suit said.

According to Halim’s statement of claim, between 2003 and 2010, Nor Mohamed was evasive, always indicating that he would revert with an appointment but never did.

When met at social functions and queried by Halim, Nor Mohamed would respond that he would “deal with the plaintiff later”.

On April 23, 2010, Mahathir in a meeting with Halim had said that Nor Mohamed had all along informed him (Mahathir) that the assets Khazanah had taken over was Umno’s and not Halim’s, meaning there was no reason to pay Halim. The lawyer Rashid was present during this meeting with Mahathir as well, according to the suit.

In a meeting organised by Mahathir, Nor Mohamed admitted that the payment “would not be forthcoming for the reasons already mentioned by Mahathir,”

Halim is alleging that Nor Mohamed, the Government and Khazanah had never intended to pay or perform their end of the bargain, and had induced him fraudulently or recklessly — not caring whether the representations were true or false — to part with Renong and UEM and other assets.

Now, Halim is claiming RM1.3 billion (pursuant to the RM325 million in cash, RM325 million in cash equivalents, and RM650 million in Prolink development land agreement), general damages for the Renong purchase obligation, RM508 million being the prescribed value of Kualiti Alam, alternatively damages for fraudulent misrepresentation, interest, cost among others.

Whether he succeeds or not, Halim has certainly ruffled some feathers.

Nor Mohamed who is no longer an MP now after being dropped as a parliamentary candidate was recently appointed deputy chairman of Khazanah and heads the executive committee of Khazanah.

Who is Halim Saad?

Halim who was once the poster boy for corporate Malaysia in the 1990’s, and protégé of former Finance Minister Daim Zainuddin, was born in the northern state of Perlis, and will turn 60 in October this year.

He has been low key ever since he stepped down as executive chairman of his flagship Renong on Oct 3, 2001, or about 12 years ago.

“He did surface in companies like Seloga (Holdings Bhd in mid-2004), and more recently Sumatec (Resources Bhd), and there were some like Hektar (Real Estate Investment Trust), which was said to be controlled by him… but nothing like his heyday in Renong,” a seasoned remisier said when contacted by KiniBiz.

Halim, a member of the famous Malay College Kuala Kangsar alumni, and a New Zealand trained accountant, joined Peremba in the early 1980’s, a company linked to former Finance Minister Daim, who was the chairman of Peremba.

In Peremba, Halim climbed the ranks to become a corporate services manager, and was involved as director in some of Daim’s personal companies such as Daza Sdn Bhd (later renamed Tekal) and sold to Umno linked Fleet Group.

It was not always easy to identify Umno’s assets, and differentiate them from the proxy holders such as Halim’s assets.

Halim was also a director of the Umno-linked Halimtan network of companies, which included Pradaz, Roxy and CSM, and importantly also Hatibudi Sdn Bhd.

Hatibudi took control of United Engineers (M) Bhd (UEM), after which the later was awarded many lucrative projects such as the North South Highway.

In the 90’s Renong took over a considerable number of assets belonging to Umno, such as Fleet Group, Hatibudi and Koperasi Usaha Bersatu Bhd (now known as KUB Bhd).

By March 1991, Halim controlled about 73% of Renong, 15.07% directly and the rest indirectly, through shares held under companies such as Fleet Holdings in which Halim had 50% equity interest.

Halim and his wife then, Noraini Zolkifli (they went through a messy divorce in the late 90’s), also controlled companies such as Hanuma Sdn Bhd, which in turned controlled private companies such as Hanurai Sdn Bhd and Pacific Fleet Sdn Bhd which had significant stakes in Renong.

In December 1990, Renong had RM1.26 billion in terms of assets, and was only smaller than plantation giants Sime Darby Bhd on the local bourse.

In 1992, business magazine Malaysian Business had Halim’s net at about RM2.4 billion, making him among the richest men in the country.

Renong and UEM crumbled in the late 90’s as a result of the Asian Financial Crisis, under the weight of some RM30 billion in debts.

Now Halim is back, he’s suing the Government for what he claims is rightfully his. Whether he succeeds, or whether the suit will be settled out of court, away from the public eye remains to be seen.

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Tomorrow:

We take a look at the go-go years, and some of the irregularities in the whole UEM-Renong saga.