bernie;
This news from WSJ re: Sime Darby
Sime Darby Pilipinas Is Sued
By Minority Shareholders
By JON LIDEN
Staff Reporter of THE WALL STREET JOURNAL
MANILA, Philippines -- In a revolt of minority shareholders, a board
member of Sime Darby Pilipinas Inc. is suing the board's majority
members, accusing them of mismanagement and hurting minority interests.
In addition, Mark Mobius, who heads Templeton Asset Management
Ltd., said he may protest the board's decision, announced Monday, to
spend 1.2 billion pesos ($30.82 million) to buy a majority stake in a sister
company. Templeton owns 5% of Sime Darby Pilipinas.
"We are investigating," Mr. Mobius said Thursday. "If this is true, we
object very strongly to such an action. We will use every effort to prevent
this acquisition from taking place."
In a complaint filed May 22 with the Philippine Securities and Exchange
Commission but not made public until Thursday, Leonardo Alejandrino
alleges that Sime Darby Pilipinas is violating a Philippine law prohibiting the
use of dummy companies to hide illegal land purchases. The complaint
charges that the company owns Philippine real estate in violation of the
country's constitution, which limits land ownership to Philippine citizens.
'Difference of Opinion'
Mr. Alejandrino represents about 10% of Sime Darby Pilipinas' shares,
including Templeton's. The Philippine company is 60%-owned by Sime
Darby Far East Ltd., which is a subsidiary of Malaysian conglomerate
Sime Darby Bhd.
In a faxed reply to requests for comment, Sime Darby Pilipinas Chairman
Ricardo Romulo said: "Mr. Alejandrino is attempting to make a federal
case out of what is simply a difference of opinion over investment strategy
and management style. The real issue, however, between Sime Darby and
Alejandrino boils down to his desire to be bought out, which Sime Darby
refuses to do."
Mr. Alejandrino says his aim is only to protect the interests of the
company's 1,300 minority shareholders. He believes that the company
should be paying dividends instead of spending its cash on what he calls
questionable investments.
The suit is among the first of its kind in the Philippines, but it's part of a
growing trend in Asia of minority shareholders challenging their companies.
These shareholders, many of them institutional investors, are taking a
bolder line, demanding more transparency and greater attention paid to
maximizing value for all shareholders rather than just the majority owners.
Shining a Spotlight
The suit is likely to attract attention because it involves Sime Darby Bhd.,
which recently had to sell its banking and brokerage units at a huge loss,
and because the chairman of Sime Darby Pilipinas, Mr. Romulo, is a
widely respected lawyer and a senior partner in Romulo, Mabanta,
Buenaventura, Sayoc & de Los Angeles, one of the most prestigious law
firms in the Philippines.
The decision by Mr. Mobius, a high-profile fund manager, to speak out
against Sime Darby Pilipinas' move to buy a majority stake in a sister
company also will get people's attention. The board agreed to buy a 51%
stake in Lec Refrigeration PLC, a wholly owned subsidiary of Sime Darby
London Ltd., which is a subsidiary of Sime Darby Bhd.
In the wake of the decision, Mr. Alejandrino immediately wrote a letter to
Mr. Romulo, charging that the board was using the company's cash to
"prop up one of the Malaysian [parent] company's losing operations." In
the letter, he adds: "It appears that to shore up its position, Sime Darby
Bhd. is now using the cash position of its less-than-fully owned subsidiaries
to prop up the group's finances."
Lots of Cash
Sime Darby Pilipinas has lots of cash on hand because it was forced in
1996 to sell its major tire-production business after a bitter strike, leaving
it with 1.8 billion pesos in cash and a few small, unprofitable trading
ventures.
Speaking from the U.S. Thursday, Mr. Alejandrino said he decided to buy
into the company because it traded at a large discount to its book value.
But then he became disturbed by the company's decision to enter the
Philippine real-estate business. "Not only was this a time when everybody
else was trying to get out of real estate," he says, "but I also wondered
how a foreign company could engage in real estate when it is barred from
owning land."
Using proxies from institutional investors and his own shares, Mr.
Alejandrino, a venture capitalist who earlier had built up and then left
Peregrine Capital Philippines Inc., captured a board seat in October 1997.
Then, according to his complaint with the securities commission, the
company's management only reluctantly agreed to let him review the
company's books.
What he found, he says, was that Sime Darby Pilipinas in mid-1997 had
allegedly set up two shell companies using a Sime Darby employees'
retirement fund as the Philippine majority holder of one of the companies.
These two companies had set up a third company, Green East Prime
Ventures, which they used to buy a property in Rizal province, east of
Manila. The majorities of the boards of each of the three companies are
the same people, and they also represent Sime Darby Bhd. on the Sime
Darby Pilipinas board.
Several Concerns
Mr. Alejandrino claims that since the retirement fund is financed by the
company -- which is 84.7%-foreign-owned -- and not by employee
contributions, it must be regarded as a foreign entity. The suit alleges that
the companies were set up to circumvent the prohibition on foreigners
owning property in the Philippines.
The suit also claims that Green East overvalued the land it bought, paying
1,260 pesos a square meter, compared with the 900 pesos a square meter
quoted by an independent appraisal that Mr. Alejandrino requested. This
means Sime Darby Pilipinas wasted money, he claims.
In February, he wrote a letter to the board raising these issues and asking
the board to address them, but so far the board hasn't.
Mr. Romulo, Sime Darby Pilipinas' chairman, declined to discuss specific
issues, saying that "Sime Darby reserves its detailed reply to Alejandrino's
baseless complaint for the SEC, where the matter should be settled." |
