Thursday, August 18, 2011

Quek buys into American Airlines

KUALA LUMPUR: It seems that Malaysian players are increasingly looking westward, as depressed asset prices in the US and a weak greenback have made assets there attractive to cash-rich Malaysian tycoons looking for a slice of the American pie.

Local billionaire Tan Sri Quek Leng Chan of the Hong Leong group, through his Hong-Kong based company, Guoco Group Ltd, purchased a 7.3% stake in New York-listed company, AMR Corp, which owns American Airlines Inc, the Dallas News reported in an article published on Monday.

“The disclosures [with the US Securities and Exchange Commission last Thursday] listed Quek and eight companies with sole or shared power over the 24.4 million shares bought, out of about 335.2 million AMR shares outstanding,” according to the newspaper.

Dallas News also said when AMR filed its proxy statement in April, its largest shareholders as at April 1 were PRIMECAP Management Co with 12.5% of AMR’s outstanding shares, Capital Research Global Investors 9.4% and Capital World Investors 8.4%. Quek’s 7.3% stake makes him the fourth largest shareholder in AMR.

Another Malaysian company that has made international headlines is Genting Bhd, which this year alone secured development rights to a racetrack casino in Queens, New York. The group also dished out RM704 million in an all-cash deal to purchase a substantial site in Miami. It is drawing up plans for a commercial and residential development on the site which may house a casino.
In the case of Quek’s acquisition, Dallas News reported that Guoco led the group of companies that invested in AMR and “is the only one listed with shared control of all 24.4 million shares”.

The other companies involved in the transaction include Hong Kong-based Asia Fountain Investment Co Ltd; two companies based in the Cayman Islands: ewton (Cayman) Ltd and Chaghese Ltd; GuoLine Capital Assets Ltd, Jersey, Channel Islands; GuoLine Capital Ltd, Bermuda; Hong Leong Co (M) Bhd; and another Malaysian company, HL Holdings Sdn Bhd.

AMR’s shares fell to a 28-month low of US$3.33 (RM9.92) on Aug 8 but managed to recover by 13.5% a week later to close at US$3.78 on the New York Stock Exchange on Monday. The stock rose to US$3.84 on Tuesday.

“Based on Monday’s close, the shares purchased by the investment groups would be worth US$92.2 million. AMR’s market capitalisation, or shares outstanding multiplied by the share price, was about US$1.27 billion,” said Dallas News.

AMR’s shares have more than halved in value from a 52-week high of US$8.98, and have slumped from around US$40 in early 2007.

Quek is known to be a savvy and smart investor, cutting deals both locally and globally.

Guoco had in May become the largest shareholder in British-owned and London-based Rank Group, which owns and operates casinos. After acquiring Genting Singapore Plc’s (GENS) 11.03% stake in Rank Group and a general offer, Guoco ended up with 74.5% of Rank in July.

GENS had sold its 43.09 million shares, at 150 pence (RM7.35) per share. This was below analysts’ estimate of its fair value at between 160 pence and 200 pence per share then, according to reports. In fact, Rank’s board advised its shareholders to reject the general offer by Guoco at 150 pence after the latter’s shareholding breached the 30% threshold.

Quek started investing in Rank with a 4.09% stake acquired in early 2008. This was soon after Rank’s share price slumped in 2007, following the double whammy of a smoking ban in UK casinos and a ruling under the Gambling Act, which forced it to remove about 950 high-jackpot gaming terminals from its Mecca Bingo clubs and some from its Grosvenor Casinos.

In banking and finance, Quek has done extremely well, also through a series of strategic well-timed acquisitions.

In January 1994, he acquired the former MUI Bank through Hong Leong Credit Bhd (now known as Hong Leong Financial Group Bhd), which birthed Hong Leong Bank. In October of the same year, Hong Leong Bank was listed, returning much of his original investment.

Hong Leong Bank took another step forward when it completed, in May 2011, its acquisition of the EON Bank group, which elevated it to become the fourth largest Malaysian bank by assets. The acquisition, which was long delayed by several lawsuits, was priced at a relatively low 1.4 times book.

In June 2010, Mitsui Sumitomo Insurance Co Ltd took a 30% stake in Quek’s Hong Leong Assurance Bhd at a record 6.5 times price-to-book ratio based on a merged valuation of both the life and general insurance businesses.

Overseas, Quek’s Guoco group acquired Hong Kong-based Dao Heng Bank in 1982 and listed it in 1983. In 2001, Guoco sold a majority 71.3% stake in Dao Heng Bank to Singapore’s DBS Bank for HK$41.92 billion (RM16 billion), or a record 3.5 times book value.

Guoco has also raised its stake in another Hong Kong-listed bank, Bank of East Asia Ltd, to 12.04% on Aug 10, buying 1.4 million shares for about HK$40.12 million.

In the non-financial sphere, Quek also made several strategic investment moves, including the privatisation of Hume Industries Bhd last year. Most of ume’s assets were then injected into Hong Leong Industries Bhd, another of his companies.

According to Forbes, Quek’s net worth was estimated at over RM14 billion this year.
Written by Joanne Nayagam   
Thursday, 18 August 2011 14:44

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