KUALA LUMPUR: Tycoon Tan Sri Vincent Tan has aborted his plan to inject Ascot Sports Sdn Bhd, the company supposedly with a sports betting licence, into Berjaya Corporation Bhd (BCorp) for RM525 million cash.

In a statement yesterday, BCorp and Ascot stressed that the government had backtracked on its decision to issue the licence despite having granted its approval for the reissuance.

BCorp’s announcement comes following confirmation that the government will not issue any sports betting licence. Last Friday, Prime Minister Datuk Seri Najib Razak told reporters that the government would not issue any sports betting licence due to the strong opposition from the people.

“The board of directors of BCorp deeply regrets and is extremely disappointed that its intended purchase of a 70% stake in Ascot Sports Sdn Bhd which was announced on May 12, 2010 has been frustrated due to the government’s decision not to reissue the sports betting licence to Ascot Sports despite having granted its approval for the reissuance of the licence,” it said.

“In view of the above decision made by the government and announced by the Prime Minister late Friday, June 25, 2010, the proposed acquisition of the 70% stake in Ascot Sports by BCorp is aborted. Consequently, the proposed rights issue which was intended to raise up to RM614.45 million is also aborted,” BCorp said in a statement.

Tan’s son Datuk Robin Tan holds the remaining 30% equity stake in Ascot Sports.

On May 12, BCorp announced a proposal to buy a 70% equity stake in Ascot Sports from major shareholder Tan. In the announcement, BCorp said the Ministry of Finance (MoF) had “given its approval for the reissuance to Ascot Sports the licence to carry out sports betting operations upon certain terms and conditions”.

It said the acquisition would be financed through a rights issue.

To sweeten the fund raising, Tan had given a guarantee of an aggregate net profit of RM375 million for the first three years of operation. This translates into an annual net profit of RM125 million for BCorp, which is a considerable amount as BCorp had recorded a net loss of RM53.3 millon for the financial year ended April 30, 2009.

BCorp had also said that it would be pursuing its gaming business for ventures such as sports betting abroad.

“Notwithstanding this backtracking by the government, the board remains resolute in its efforts to expand the company’s portfolio of core business activities. The gaming sector will remain one of its primary focuses for its high-yielding potential. The company will continue to pursue such ventures both locally and abroad,” BCorp stated.

BCorp’s share price jumped 12 sen or 7.8% to RM1.66 when the stock resumed trading on May 13, a day after the announcement.

But, less than three weeks later, Najib, who is also the finance minister, told Parliament that the MoF had yet “to reissue the sports betting licence to Ascot”.

He added that the ministry was “in the midst of discussing the licence terms and conditions”.  

This prompted Bursa Malaysia and the Securities Commission to investigate BCorp for a possible violation of the listing rules with regard to furnishing misleading information.

Until now analysts question if BCorp had jumped the gun when it made the announcement in May before geting confirmation on the sports betting licence from the relevant authorities or if this was another flip-flop on the part of the government.

Some quarters feel that Tan had been too hasty to inject the sports betting business into the public-listed flagship BCorp. Others  question why MoF did not immediately clarify that BCorp’s announcement of May 12 was premature. Najib only commented on it three weeks later.

But the latest statement from BCorp clears the air to a large extent as the company has maintained that the government had granted its approval for the reissuance of the licence. But the question remains as to why such detailed information was not made public.

The uncertainties over the sports betting licence have weighed on BCorp’s share price, which tumbled to a three-month low of RM1.41 last Friday, down 15% from RM1.66 on May 13, the day after BCorp’s announcement on the licence.

Year-to-date, the stock is up 11.9% compared with the 3.97% rise for the benchmark FBM KLCI.

Analysts said the failure to secure the sports betting licence might probably spark another round of selling on BCorp shares.

Nonetheless, some analysts believe there is still some intrinsic value in BCorp, which has been off the radar of institutional investors for a long time, even without the sports betting business.

BCorp is unlocking some of its assets, for instance via the back-door listing of its direct-selling business Cosway Corp Ltd in Hong Kong last November and the initial public offering (IPO) of Berjaya Retail Bhd that houses convenient store chain 7-Eleven Malaysia Sdn Bhd and Singer (M) Sdn Bhd. Also, the group has submitted its application for the listing of Berjaya Roasters (M) Sdn Bhd.

Meanwhile, BCorp has been rather generous in its dividends. The group has proposed a special dividend of 4.5 sen plus a restricted offer of irredeemable convertible unsecured loan stocks (ICULS) in Cosway at nine sen per unit.

Under the proposal, shareholders could use the special dividend to subscribe for the Cosway ICULS, which traded at HK$0.96 last Friday. The conversion price of the ICULS is HK$0.20.

On top of that, BCorp is also giving dividend-in-specie of Berjaya Retail Bhd shares to its shareholders.

This article appeared in The Edge Financial Daily, June 28, 2010.