What’s really happening at Berjaya Corp Bhd (BCorp)? Did it jump the gun when it announced on May 12 that the Ministry of Finance (MoF) had “given its approval for the re-issuance to Ascot (Sports Sdn Bhd) the licence to carry out sports betting operations upon certain terms and conditions”.

Would any public-listed company make an announcement to Bursa Malaysia if approval for a contract or licence had not already been confirmed in black and white? One would hardly think so.
Thus, when Bursa Malaysia and the Securities Commission (SC) said on June 10 that they were investigating BCorp — the flagship of Tan Sri Vincent Tan — for a possible violation of listing rules, it created a lot of confusion.

On May 12, Tan announced that he wanted to inject his 70% equity stake in Ascot — which is said to be the country’s sole sports betting licence holder — into BCorp, in which he also owns substantial shareholding. Tan’s son, Datuk Robin Tan, owns the remaining 30%.

BCorp has hired AmInvestment Bank Bhd to be its main adviser and OSK Investment Bank Bhd as the independent adviser for the sizeable acquisition.

Tan is selling his shares in Ascot to BCorp for RM525 million cash. Initially, he wanted to use the sum to subscribe for his entitlements for the rights issue that BCorp would later undertake to raise funds for the purchase.

The diversified group also stated in the announcement that Ascot proposed to commence its sports betting operation in the second half of the year, with its retail betting operation housed at 220 selected Sports Toto outlets, subject to the necessary approvals being obtained. It was in the same announcement that BCorp said Ascot had obtained  approval to restart its sports betting operation.

To sweeten the deal, Tan is giving a guarantee of an aggregate net profit of RM375 million for FY2011 to FY2013, ended April 30. This translates into an annual net profit of RM125 million, which is a considerable sum considering BCorp posted a net profit of RM109 million for FY2009.
The deal looked good, and many investors bought the story that for BCorp, the sports betting business would be another money-spinner. BCorp’s share price rose 12 sen or 7.8% to RM1.66 when the counter resumed trading on May 13, a day after the announcement was made.

Many would have admired the tycoon’s ability to get the sports betting licence, on top of the lotto games licence and a mobile phone service licence granted to him earlier.

Less than three weeks later, however, things took a drastic turn.  On June 7, Prime Minister Datuk Seri Najib Razak, who is also the finance minister, told Parliament that the MoF had yet “to issue the sports betting licence to Ascot”. He added that the ministry was “in the midst of discussing the licence terms and conditions”.

Two days later, both Bursa and the SC said they were investigating BCorp’s announcement on the proposed acquisition of an equity stake in Ascot. They are looking into possible breaches of the listing requirements by BCorp and will take the “appropriate” actions if that is found to be the case.
It spooked investors and triggered a selling wave, causing BCorp’s share price to fall to a three-month low of RM1.36 on June 11, from RM1.66 about two months back, slashing  18% off its peak price.

All this came about shortly after Tan announced over the weekend of June 5 that he wanted to set up the “Better Malaysia Foundation” by donating the RM525 million proceeds he expects to receive from BCorp.

BCorp is caught in a difficult situation. Questions now abound as to what really happened. Did Tan take the risk of jumping the gun by announcing the re-issuance of the sports betting licence without getting the green light in black and white from the authorities? Or is it merely a storm in a teacup?

It is rather puzzling that the MoF did not immediately clarify that BCorp’s announcement was premature. It was made on May 12, and Najib only spoke about it in Parliament on June 7.

Three weeks is a long time to allow such an announcement, which has significant implications on the bottom line and prospects of BCorp, to go without clarification if there were no basis for it. Or was it another case of flip flop?

Ironically, at the end of April, Deputy Finance Minister Datuk Dr Awang Adek Hussein told the media that the government was studying the possibility of issuing sport betting licences to curb illegal betting. He said the legalisation could come before the start of the FIFA World Cup on June 11.

Awang Adek’s comments fanned speculation that the parties would be granted the licences. Tan was seen as one of the obvious candidates because Ascot was given first refusal right should the government re-issue a sports betting licence.

Interestingly, before TheEdge went to print last Friday, BCorp broke the silence.

The group announced to Bursa that Ascot has got approval from the MoF to conduct a sports betting operations. BCorp also said that the formal licence, first issued in 1987, “is pending re-issuance”.

Would the confusion have been avoided if BCorp had stated it clearly from the very beginning?

This article appeared in Corporate page of The Edge Malaysia, Issue 810, June 14-20, 2010