He
is amongst Asia's wealthiest tycoons. We
have worked with Tan Sri Dr. Khoo Kay-Peng. When he purchased
Laura Ashley, 太太 joined in on the meeting in Boston with
the new management he inherited. He and his family are devoted and
generous international philanthropists. Often he co-invests with
his friend Robert Kuok - as he did with the South China Morning
Post. He cashed out that investment to purchase Laura Ashley.
Tan Sri Dr. Khoo Kay Peng is the Chairman
and Group Chief Executive of the MUI Group of companies, which is a
diversified conglomerate with interests in the Asia Pacific, Australia, the
US and the UK. Previously, Tan Sri Khoo had served as Director of Banking
Operations in Bank Bumiputra Malaysia Berhad and as Vice Chairman of Malayan
Banking Berhad. Currently, he is a trustee of Malaysian Humanitarian
Foundation and Regent University, Virginia, USA.
Malaysian tycoon enters fray on side
of Southern Bank boss
Khoo Kay Peng's vehicle buys 4.03%
of bank's parent Killinghall
16 Nov 2005 -
Malaysian tycoon Khoo Kay Peng has come to the aid of embattled Southern
Bank boss Tan Teong Hean.
On Monday, Mr Khoo's MUI Properties told Bursa
Malaysia it has bought 4.03 per cent of the bank's parent company,
Killinghall, for RM18.4 million (S$8.3 million).
Southern Bank is being eyed for takeover by
Malaysia's second-biggest lender CIMB - a prospect Mr Tan does not relish,
and which is why he has been beefing up his defences.
Mr Khoo's entry appears to be a calculated shot
across CIMB's bow. A devout Christian who is rarely seen in public, he is
believed to be an old friend of Mr Tan. Indeed, he let Mr Tan into banking
by selling more than 20 per cent of Southern Bank to Tan-controlled
Killinghall back in 1984.
Mr Khoo's move illustrates Mr Tan's determination
to put up a fight against CIMB - although most analysts reckon the odds are
stacked against him for two reasons.
One, the deal makes sense. And two, CIMB is a
powerful government-linked company.
Since CIMB's takeover intentions became clear last
month, Southern Bank has circled its wagons. It has spent RM28 million
buying back seven million of its own shares.
These are now precluded from voting in the event
of a takeover bid - a move that effectively raises Mr Tan's voting interests
in the bank.
Killinghall is a listed company that owns the
single-largest share - 16.4 per cent - of Southern Bank.
Beyond that, Mr Tan and his partners - the Sultan
of Malaysia's Selangor state and Syed Yusof Syed Nasir - control Ramuda, a
private company that owns 32 per cent of Killinghall on a diluted basis.
Last week, Southern Bank sold its entire interest
in Killinghall - 14.7 million shares or a 7.8 per cent stake - to
unidentified buyers, almost certainly friendly to Mr Tan.
This followed purchases of Killinghall stock by Mr
Tan's wife Lim Siew Lay, who has announced that she owns 7.5 per cent of
Killinghall.
Now, with the entry of Mr Khoo, interests close to
Mr Tan may control close to 20 per cent of Killinghall.
On Monday, Killinghall said it had received a
letter from CIMB inviting it to begin exploratory talks on a possible
merger.
Killinghall said it will seek approval from
Malaysia's central bank before 'responding to CIMB's written invitation.'
Not everyone thinks Mr Tan will lose to CIMB. In a
recent report, AmSecurities said there 'is a higher than 50 per cent chance
that this deal will not go through'.
Its reason: Southern Bank believes RM5 per
Southern Bank share is a good place to start negotiations, and that's too
rich for CIMB. 'Both parties thus have to compromise and reach a middle road
but, at this stage, it is hard to see how this can happen,' said
AmSecurities. - SINGAPORE
BUSINESS TIMES
Home furnishings and women's garments retailer
Laura Ashley has a big international name, but worldwide sales are in free
fall. Few realise that the quintessentially English brand with its flagship
store in London's Regent Street and factories in Wales is actually
controlled out of Malaysia. And that might be a big part of the problem.
Asia's entrepreneurs are not good at building brands. That is the
conventional wisdom. And traditionally it's true. Mostly they remain traders
who make money by dealing in high-volume, low-margin commodities and who
loathe spending on intangibles such as consumer research, marketing and
brand development.
But a strong brand means higher margins. Many Asian entrepreneurs understand
this but lack expertise in brand building. So some have adopted a backdoor
method of owning a brand: they have bought into existing brands that have
been developed in the West. Malaysians have been particularly keen to take
this route. Several well-known Australian brand names such as Snappy Tom pet
food, Safcol canned tuna and Video Ezy now have Malaysian owners, for
example.
The acquisition of Laura Ashley by Malaysian businessman Khoo Kay Peng and
his MUI Group is an example on the international scene. The retailer has
hundreds of stores worldwide and 30 franchised outlets in Australia
including its prominent Melbourne Central store in Lonsdale Street. (MUI
also controls ASX-listed Network Foods.)
Famous for its floral print fabrics and dresses, Laura Ashley was founded by
the British designer of the same name. Ashley died in 1985 from a brain
hemorrhage after falling down the stairs at her daughter's English country
home on her 60th birthday. The company was publicly floated the following
year and began to make losses soon after.
By 1998, Laura Ashley was in danger of collapse. MUI Group entered, paying
$US73 million for a 40 per cent stake. This recapitalised the chain and, for
its part, MUI imagined it was picking up a ready-made international brand
cheaply. But was MUI well placed to handle a now struggling international
brand? With interests in hotels, resorts, food, media, travel, property,
construction and financial services, to say that group management was
stretched is something of an understatement. MUI struggled to restore Laura
Ashley to profitability. It now is, but for how long? Sales slumped a
massive 11.4 per cent last year.
Like-for-like sales in Britain fell 10.2 per cent and 22 stores were closed
(though six new ones opened). Reportedly, sales are down another 14 per cent
this year.
Management at Laura Ashley has been unstable too: the company has had 10
chief executives in 14 years (which admittedly also takes in the period
before MUI Group acquired control). The past few CEOs have been Malaysian
including the current CEO, Lillian Tan. She has retailing experience in
Malaysia, but even in the relatively benign Malaysian market MUI's retailing
interests have struggled. And now Tan must manage Laura Ashley worldwide,
including in the all-important but fiercely competitive London retail
market.
The company last week announced it would close its high-visibility flagship
Regent Street store, near London's busy Oxford Circus tube station. It will
be a big blow to the brand. The premises have not seen a rent rise since
1957. The rent is to increase 19 times its current level.
A company statement said such a hike would make it unprofitable to continue.
What it was really saying is that the store hasn't really been profitable on
today's commercial terms all along. Regular sales and offers are eating into
margins and have left customers wondering if they should ever pay full price
for anything at Laura Ashley. This week, for example, it is offering
customers in Britain up to half off on its home furnishings range.
Khoo, who now has a 24 per cent stake as well as MUI's 34 per cent, can
hardly afford problems at Laura Ashley. MUI Group is hundreds of millions in
debt (earnings do not cover debt repayments), is way too complex and has
well-known corporate governance problems. It is now very much on the nose
with investors. Its listed Malaysian companies are doing poorly: MUI
Industries, MUI Properties and Pan Malaysia Corporation lost a combined
$US547 million last year. The group has been selling assets to plug holes in
its balance sheets, including the Victoria Hotel in Little Collins Street,
its cement business in Malaysia and, as of last week, eight hotels in
Britain, which raised $US60 million ($A78 million) in cash.
Khoo is an active fundamentalist Christian who has traded assets among his
network of fellow Christian entrepreneurs. He has formed joint ventures with
American evangelist Pat Robertson (founder of the Christian Coalition) and
bought two family hotels in North Carolina from Jim Bakker, another former
televangelist. And on taking control of Laura Ashley, Khoo appointed Pat
Robertson to its board of directors. (Robertson resigned in mid-1999.)
Rumours have circulated that with all Khoo's problems, Laura Ashley might be
the next asset on the block. You can bet that insiders have been sounded out
about the stake already. Possible buyers include Indonesia's Riady family,
which already has big retailing interests in Indonesia and might be looking
for an international brand of its own. They are ethnically Chinese, too,
importantly are part of Khoo's fundamentalist Christian network and have
done business with him in the past.
If the stake comes onto the open market, it will only be because it has been
rejected by friends and other insiders already. - 30
June 2005 MALAYSIA
TODAY
Editor's notes: Tan
Sri Khoo sold his interest in the South China Morning Post and invested in
Laura Ashley in 1998 or thereabouts.
Dr. Khoo Kay Peng
received Christ in 1976 and was baptized that same year together with his
wife, Pauline and children. He is the Chief Executive of Malaysia United
Industries, a vibrant, growing corporation. He ascribes his success in the
business world to God's grace and blessing on his life. His contribution to
nation-building has earned him two titles, "DATO" and "TAN
SRI," awarded both by the Sultan of the State of Johor and the King of
the Nation of Malaysia. The Prime Minister appointed him Chairman of the
Tourist Development Corporation in 1995. The Curtin University of Technology
in Perth, Western Australia, conferred a Doctor of Letters to him for his
contribution to education. He lives a God-fearing life and always desires to
do the will of God. - AGTS
Editors note: Tan
Sri K.P. Khoo is a valued client whose friendship we have been blessed for
over two decades now.
