A deal that was not meant to be


  • Business
  • Saturday, 10 Jan 2009

Sideways - By Anita Gabriel

IN the office of Hisham Hamdan, Sime Darby Bhd’s executive vice-president of group strategy and business development who is also responsible for the group’s healthcare business, one poster out of many hanging on the wall, I am told, stands out. It says “In God, we trust. Everyone else, bring data.”

That’s ironic given how the conglomerate had miscalculated its move to take over the National Heart Institute (IJN), which it eventually bowed out of merely three weeks after announcing its bid. As Sime Darby will vouch for now, after weeks of fending off public indignation that rippled through the nation, sometimes, number crunching alone is not enough to back up a deal.

The proposed “hostile” takeover had put Sime Darby on the grandstand of public dissent and dwarfed its status as the world’s largest plantation company to a prowling corporate predator about to swallow a venerable institution.

Nobody can say for sure that if Sime Darby had taken over IJN, it would have marked the end of the institute’s hard-earned reputation as a well-managed entity with a profitable socio-economic formula. But the scepticism was understandable.

IJN, the country’s leading heart institution, was corporatised in 1992. It is wholly owned by IJN Holdings, which in turn is controlled by Minister of Finance and has a paid-up capital of RM221.62mil. In 2007, it made an operating revenue of RM287mil and profit after tax of RM14mil.

In fact, about a year back, an idea was mooted for investment agency Khazanah Nasional Bhd, which already has a substantial portfolio in healthcare services, to assess if more value can be unlocked if it were to take over IJN. Khazanah, unlike Sime Darby, did the right thing. It said “No, thank you” for exactly the same reason that should have kept Sime Darby at bay – IJN is a government-owned entity that is fairly decently run and extracting further value from it would have meant dismantling its socio-economic agenda, which was the spirit on which the institute was set up.

Intriguing indeed then that Sime Darby, a government-linked company, would hold a different view. In August last year (8.08.08, to be precise), Sime Darby Bhd submitted a 12-page plan to takeover IJN. In that plan, it had outlined six possible areas of collaboration – to provide capital for IJN to expand; meeting human resource needs such as train IJN nurses; focus on overseas patients to boost medical tourism; clinical research and collaboration; sharing of facilities; and sharing of backroom facilities. But the plan remained a well-kept secret until much later in the year.

In mid-December last year, after the news broke of its intention, Sime Darby issued a note to Bursa Malaysia confirming that it has expressed its interest to the Government to acquire a stake in IJN Holdings and a day later, said it has received approval-in-principle from the Government on the acquisition of a 51% stake in IJN.

The news fanned much frustration among the public. Over the week, the company walked away from the deal, citing strong public sentiment and feedback.

But couldn’t Sime Darby have spared itself this wild, fruitless ride? Did the communication division forewarn the board and management of the potential public backlash?

Companies need to bear in mind that the communication team should be roped in right at the start of such plans to anticipate possible reactions and not after an incident has erupted. There is little point trying to get input after that point.

There needs to be a strategic outlining and mapping of issues and events that could possibly be triggered at the point of deliberating any deal.

In this light, much can be learned from what a US expert on risk communication Dr Peter Sandman had once said. “It’s the outrage, stupid. When people are outraged, they tend to think the hazard is more serious than it is.” To reduce the outrage, he suggests companies be open, honest, accountable and share control with the public on the issue. It’s a message he personally delivers to many of the business world’s top executives until today.

In other words, having a good corporate ear is just as important as having a good corporate mouth. That, he says, is “public affairs.”

Personally speaking, I’m pleased that Sime Darby had a change of heart. My dad, a retired member of parliament and senator, spent much of the last year of his life in IJN in the mid-90s due to a failing heart condition. During the long and most gruelling period of our lives, my family got to know the cardiologists and nurses very well.

They were a huge comfort, patiently and tirelessly answering each and every detailed question, assuring us they were doing all they could, in fact, making us feel that Dad was the most important patient at the institute, as he was to us. The Government picked up the tab, of course.

How can anyone match that?

·Anita Gabriel is business editor at The Star. She feels that commercial justifications do not trump everything else

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