Soldiering on for a social cause

  • Business
  • Saturday, 22 May 2010

WHEN I first decided to make the offer to acquire Maika Holdings Bhd and return to shareholders their original investment of RM100mil, many friends warned me that it was a politically-charged issue and had advised me to stay away from it.

Commercially speaking, it also made no sense as the company’s net tangible asset stood at a meagre 23 sen.

But they had missed out one salient point – this issue involves the plight of over 60,000 shareholders. Economics aside, more significantly, it is a social issue to me.

I was deeply saddened when I heard that many poor shareholders had to write off their investments while some others were desperate and sold their shares for 40-50 sen each.

As such, it was simple to think that returning to shareholders the original amount they had invested would be best under the circumstances, despite the fact that no due diligence was done.

There were many warnings of the deep losses that may be discovered. But we went ahead and made the unconditional offer to return the monies to shareholders.

We initially thought Maika’s liabilities were worth RM30mil while its assets, based on the merchant bank’s intelligence, were worth some RM110mil (latest audited results were not available).

But the liabilities had ballooned to RM52mil and we also discovered that the land had many encumbrances.

I strongly believe that undue analysis will lead to paralysis. This explains why the Maika problem continued to be a bane to the Indian community and had failed to be resolved for 26 years. We know that a thousand opinions are not as good as an immediate, effective action plan.

G Team Resources (G Team) has made an unconditional offer to all Maika shareholders that they will get their money back. Once all the share certificates have been collected, G Team will work on maximising the value of the assets and settling all the liabilities.

I must point out that all the previous offers were conditional offers subject to due diligence. In my discussions with Maika staff, the best offer was RM130mil for Oriental Capital Assurance (OCA) which does not take into consideration the liabilities of Maika. Maika owns 74.1% of OCA.

Another offer of RM148mil was also subject to due diligence, which would have reduced the offer to RM128mil. That is why the Maika board rejected it.

What surprises me is that since the G Team offer was made to return to all shareholders’ their original investment, no organisation has come forward to offer more to the cause.

In fact, among those who clamour for a higher price are those who are alluding to the fact that Maika’s management could have done better.

I cannot disagree with the painful recognition that the RM100mil invested in 1984 is still only worth that much in 2010 but to put things in perspective, shareholders are still getting RM100mil for an asset that is actually valued at 23 sen per share. It definitely makes no economic sense to buy something at a 300% premium!

There are also others who feel that the offer price should be more than RM1 per share. But to date, none of those privileged or rich shareholders (of Maika) have come forward to say they do not need the refund and to donate their share to assist the poor.

G Team will accept the liabilities and will refund any money it makes from this exercise after adding value to the assets or reducing the cost of liabilities. All parties are welcome to donate to the cause.

It’s easy for people to ask why such a deal could not have been done earlier. People ignore the fact that the MIC was holding on to Maika for 25 years, unwilling to allow anyone else to take over.

That we have finally reached a definitive action plan to end the sour note among Indians ought to be praiseworthy and a major relief. My wish is to close this dark chapter for Malaysian Indians and to allow them to look forward to better times.

I’ve said this before and I will reiterate – this is an Indian problem. It should be solved by Indians. Let us regain the community’s self-respect.

Since I made the offer that led me to being portrayed as a “white knight”, there were many instances when I almost regretted my decision. This “white knight” has taken a lot of heat and has since become a “brown knight”!

There are those who are suspicious that I am getting some other benefits from this deal or whether I have brokered a deal with the MIC leadership.

Truth is, I have not spoken to the MIC leadership for almost two years, nor have I asked the Government for any help or financial assistance.

It saddens me that a noble and responsible effort on my part had led to such incessant speculation that my move is led by a commercial agenda.

I am a good golfer and once played to a handicap of eight. In golf, you don’t have to worry about the last shot. You just need to focus on making the next shot better.

There is so much ahead of us. I hope the Indian community can become a viable and valuable community. Indians are unhappy over many things – poor living conditions in estates and even in urban areas, joblessness and lack of financial aid to pursue higher education.

Perhaps Maika, long an issue that has embittered the community, is the first step in solving the woes of the community. Let’s look forward to solving these problems.

Hopefully, once this chapter is closed it will mark a new dawn for Malaysian Indians to forge ahead with confidence. That hope is solely what has driven and motivated me to get involved in this “prickly” issue.

>Gnanalingam is executive chairman of Westports Malaysia Sdn Bhd.

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