A FAMILY tussle at Lysaght Galvanized Steel Bhd has cast a spotlight on the low-profile manufacturer of galvanised steel poles and masts. And a party that could be key to settling the feud is Singapore-listed United Engineers Ltd (UEL), which owns an 11.63% stake in Lysaght’s largest shareholder Lysaght (M) Sdn Bhd (LMSB).

In a nutshell, the tussle is between sister and brother-in-law.

 The fight started after the passing of Lysaght founder Chew Kar Heing at the age of 81 in February. He was managing director until he retired in 2004, and his widow Lim Iee Kuan is a former director.

Kar Heing, who has three daughters and a son, passed the baton to his son-in-law Liew Hoi Foo, the husband of his second daughter Chew Mee Lee.

Eldest daughter Annie Chew Meu Jong, a citizen of Australia, came into the picture after being appointed a director of Lysaght in late September.

Little is known about Kar Heing’s third daughter and only son.

Throughout the years, the Chew and Liew families have collectively owned more than 70% of Lysaght, making it a tightly held company.

Under the helm of Liew, Lysaght generated revenue of RM79 million for the financial year ended Dec 31, 2013 (FY2013), and its net profit grew 28% to RM15 million. Lysaght is a cash-rich company with zero gearing.

The group maintained a strong credit rating and healthy capital ratios. Its cash position stood at RM39.3 million, with retained profits of RM70.38 million.

A series of events in the past nine months shows that the 59-year-old Liew, who is the group managing director, has been embroiled in a tussle with his 58-year-old sister-in-law Meu Jong.

In May, Lysaght’s board proposed a share split and bonus issue along with free warrants.

On June 16, LMSB director Koh Tee Kiow proposed to bring back former Lysaght director Cheam Low Soo.

At Lysaght’s annual general meeting on June 25, Lim and another director, Yusuf Jamil, failed to be re-elected, while Cheam was appointed a director.

Based on the polling results, it is believed that Liew, who owns 15.46% of Lysaght through Ingli Sdn Bhd, voted his mother-in-law out.

Meanwhile, LMSB ousted Yusuf, but supported the appointment of Cheam.

On Aug 20, Lysaght appointed four independent directors — Datuk Hamzah Hasan, Datuk Wan Razali Wan Muda, Aik Siaw Kong and Wee Kee Hong.

But the shake-up of Lysaght’s board did not stop there. On Sept 10, Meu Jong was nominated by LMSB to fill the vacancy created with the passing of Kar Heing. Twenty days later, she was successfully appointed in an extraordinary general meeting.

Interestingly, this was Meu Jong’s sixth attempt to sit on Lysaght’s board. She made five attempts from April to July, but all written requests by LMSB were ignored by Lysaght’s board.

On Oct 14, Lysaght received a letter from LMSB, stating that it intends to vote against the proposed share split, bonus issue and free warrants. Its draft circular failed to be submitted to the stock exchange as Meu Jong did not sign the director’s declaration.

Three days later, the corporate exercise was called off.

Recent developments seem to indicate that Meu Jong is in a stronger position at the shareholder level, but Liew still has a bigger say at board level.

Lysaght’s current board consists of eight members, but Liew is the only one who holds executive power.

Meu Jong is a non-executive director. Cheam is an independent director nominated by Koh, who has connections with Meu Jong at LMSB.

Lysaght chairman Tan Sri Wan Abdul Rahman Wan Yaacob and four new independent directors make up the remaining board members.

At the group level, Lysaght is 55.14%-owned by LMSB, while Liew’s Ingli holds a 15.46% stake.

At the holding company level, LMSB is 40%-owned by Chew Bros (M) Sdn Bhd, which is controlled by Meu Jong, according to information from the Companies Commission of Malaysia.

It is worth noting that Liew also has a 17.1% stake in LMSB, held through WTWT Sdn Bhd, while the Singapore-listed UEL has an 11.63% stake.

The shareholding structures of Lysaght and LMSB clearly show that whoever controls the latter will eventually control the former.

Thus, the tussle between Liew and Meu Jong could potentially escalate from the group level to the holding company level. At this level, UEL’s 11.63% stake in LMSB could be key to settling the fight, depending on which side it supports.

Simply put, Liew has to prevent Meu Jong from getting support from UEL because if he fails to defend his position, Meu Jong’s holding in LMSB will increase to 51.63%.

By then, Liew would not be able to outclass Meu Jong, as the latter would gain control of LMSB and Lysaght.

Chew Bros is mainly owned by the Chew family, including the late Kar Heing and Lim. It remains to be seen who will inherit Kar Heing’s stake in Chew Bros.

Meu Jong is believed to be the mastermind of Chew Bros and LMSB. According to filings with Bursa Malaysia, she is Chew Bros’ managing director and has been actively assisting Kar Heing in the business.

Her 77-year-old mother Lim has lost influence power after being ousted as Lysaght director.

Liew’s wife Mee Lee also has an 8.6% stake in Chew Bros, but this is probably not enough to pose any threat to Meu Jong.

The emergence of Meu Jong raises the question of whether Liew will continue his stint at Lysaght or move on. To defend his position, will he be acquiring more shares either in LMSB or directly in Lysaght? If he moves on, will Lysaght’s performance be affected?

Minority shareholders of Lysaght would also want to know why LMSB opposed the corporate exercise.

After the corporate exercise was announced on May 15, Lysaght’s shares rose 88% to RM6.09 on June 25.

There is talk that Meu Jong might need to make a general offer for Lysaght if her holding in LMSB exceeds 50%. Thus, the increase in the share price is not favourable to Meu Jong. That might be the reason LMSB rejected the corporate exercise.

The counter ended at RM3.10 last Thursday, giving Lysaght a market capitalisation of RM129 million, wiping out all the gains made since May. Interestingly, the share price plunge could provide opportunities for Liew and Meu Jong to mop up shares on the open market.

Certainly, minorities will be watching closely Liew’s and Meu Jong’s next move.

This article first appeared in The Edge Malaysia Weekly, on October 27 - November 2, 2014.

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