Gopeng Bhd, which owns slightly more shares in Perak-Hanjoong Simen Sdn Bhd than YTL Cement Bhd, is expected to agree to jointly manage the Perak-based cement company.
Gopeng owns 35.2% of the cement producer while YTL Cement recently proposed to purchase a 32.1% stake in Perak-Hanjoong for RM75.2mil cash.
The presence of Gopeng executive director Manohar Hassan Ameer Ali at the signing of the agreement for YTL Cement's acquisition is an indication the YTL group's entry is a friendly one. He stood next to YTL Cement managing director Tan Sri Francis Yeoh in a photograph taken at the ceremony and published by StarBiz last Saturday.
The YTL group will need to work with the Gopeng group as the latter has friendly party interests that go beyond the single largest stake held directly by Gopeng.
Magnitude Network Sdn Bhd, Gopeng's controlling shareholder, directly owns an 11.9% stake in Perak-Hanjoong, which operates two cement plants in Perak.
Several of Gopeng's directors are understood to be influential personalities in Perak; three of Gopeng's directors had formerly served in the Perak State Development Corp (PSDC).
Datuk Mohd Salleh Hashim, Gopeng's managing director, and Datuk Mohamad Tahiruddin Mohd Tahir, a director, are both shareholders of Magnitude Network and were previously with the PSDC.
Datuk Shaharuddin Haron, another Gopeng director, had also worked in PSDC before.
Perak-Hanjoong was formed in 1980 in a joint venture between PSDC and Doosan Heavy Industries & Construction Co Ltd, which is publicly-listed in South Korea. Doosan is the company that is selling its 32.1% stake in Perak-Hanjoong to YTL Cement.
It is noted that Gopeng had management control of Perak-Hanjoong, not Doosan. Salleh has been managing director of Perak-Hanjoong since its inception.
Even so, the YTL group is expected to have a role in Perak-Hanjoong. “All the parties involved welcome YTL's entry,” said a source close to the two companies. YTL is a respected name and Gopeng would be looking into how it could work with the former to further their common interest in Perak Hanjoong, he added.
YTL Cement has a track record of delivering all the key financial indicators that are important to shareholders, including earnings growth, firm dividends and share price performance. The company is one of the smallest in the cement industry, but one of the most profitable.
It is buying a stake in Perak-Hanjoong at a good price. Doosan's original cost of investment in Perak-Hanjoong was RM150.5mil. The Korean company is selling its stake at less than half its investment cost to YTL Cement.
The YTL group's management strength will come in handy for Perak-Hanjoong, which has a patchy earnings record.
One of the most highly geared cement companies, Perak-Hanjoong's operating profit was not sufficient to cover its interest costs in certain years.
Both YTL and Gopeng will be discussing their common interest in the cement company. These discussions may also involve Sunway Holdings Incorporated Bhd (SunInc), whose wholly-owned subsidiary Fortuna Gembira Enterpris Sdn Bhd has a 19.3% stake in Gopeng. SunInc has two representatives on Gopeng's board.
YTL's entry is a sort of reverse foreign direct investment. Instead of a foreign company buying into a basic industry from local investors, a Malaysian corporate is buying out the foreign company. This is significant, especially since about 50% of the nation's cement producing capacity is controlled by the French-British Lafarge group.
This could be the first chapter in YTL's interest in Perak-Hanjoong. “YTL has been buying cement capacities in Malaysia. You can expect more developments in Perak-Hanjoong,” an analyst said.
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