KULIM-QSR-KFC CREATING FALSE MARKETS?

JOHOR BAHRU. Jan 5: The discovery of a letter from Johor Corporation’s chairman to the board of Kulim (M) Bhd in November paints a different light on the saga of the attempted sale of QSR Brands Bhd and KFC Holdings (Malaysia ) Bhd.

The letter dated Nov 29, 2010 shows that Datuk Abdul Ghani Othman, JCorp’s chairman and the state’s Chief Minister, had clearly stated that it (JCorp) did not want Kulim to dispose its stake in QSR Brands Bhd.

He mentions in the letter that QSR and its subsidiaries are experiencing robust growth and more value can be realised by developing the full potential of QSR. The letter was received and signed by Kulim’s Managing Director Ahamad Mohamad.

Kulim had later on the same day Nov 29, 2010, made an announcement to Bursa  Malaysia on JCorp's intention of not selling these assets.

JCorp owns 53% of Kulim, which in turn owns 57.5% of QSR. QSR is the parent company of KFC, holding 50.6% of Malaysia ’s largest fast food operator.

This raises questions as to why Kulim’s chairman Tan Sri Muhammad Ali Hashim had made a claim that JCorp was keen on selling off its assets like QSR and KFC.

Muhammad Ali had on December 21, 2010 posted a media statement in his blog and held interviews with Utusan Malaysia and Business Times to announce that he was being removed from Kulim because JCorp intended to “asset strip” the group.

“It appears now that the contrary is true. JCorp’s letter reveals it had never intended to dispose its prized assets of QSR-KFC. So with Muhammad Ali saying things to the contrary, the question arises whether he was creating a false market for the shares of QSR, KFC and Kulim, by talking about the deal that was never going to happen?” says a corporate lawyer familiar with the situation.

Indeed it had been earlier reported there was a likelihood it was Muhammad Ali, after leaving JCorp in July, who had put QSR and KFC up for sale.

“If it wasn’t JCorp that was keen to sell, as clearly spelled out in the letter from Ghani Othman, then who had put up the sale of QSR, that got the interest of such big name global private equity players? It must have been someone who was wielding a lot of power in these companies,” quips an investment banker.

To recap, in November 2010, two bids were received, one to Kulim’s board from the Carlyle group and the other to QSR Board from parties linked to tycoon, Tan Sri Halim Saad, which had teamed up with CVC Capital Partners and KUB Malaysia Berhad. 

This caused a lot of excitement in the share prices of all three companies -- Kulim, QSR and KFC. However JCorp rejected all offers, in line with the letter that it had issued to Kulim.

“I am surprised how the chairman of Kulim who has fiduciary duty to shareholders could mislead them by mooting the idea of the sale of assets within that company so as to create a false market. When the market is manipulated through false information, there is bound to be volatile swings, with the true market clouded by misinformation,” an analyst in a stock broking firm said.

“When investors use inaccurate information to guide their decisions, they tend be irrational and over-or-under react to news. What happens is that investors make decisions that are irrational and not reflective of the fundamentals of the business,” he said. 

“As a director of a company, he is in possession of price-sensitive information that is to be used for the advancement of shareholder interest but instead uses it to manipulate them. This is a very serious offence which warrants stern action from Bursa,” said a senior corporate lawyer. - TnT