The Covid-19 pandemic has turned out to be a great reset for Tan Sri Vincent Tan, the patriarch of Berjaya Group. The group that is anchored on a gamut of economic activities ranging from gaming to fast food, pharmaceutical products, property development, hotels and resorts has taken a beating from the global recession.
Berjaya’s weak fundamentals despite an array of assets were laid bare when shareholders’ value for the group as a whole was shaved by more than 30%. According to data compiled by a private research unit, Tan’s paper wealth dropped to RM1.4 billion from RM2.16 billion in 2019, causing him to slip out of the list of top 40 richest Malaysians.
This was despite Tan coming back to helm his flagship company, Berjaya Corp Bhd, in November 2017. In February 2012, after he turned 60, Tan relinquished his position to his eldest son, Robin. On his return, Tan felt that he had looked at many business opportunities for the group during the five years he had been out of it and wanted to deliberate on the decision-making at the board level.
In the last few years, Berjaya Group had cleaned up some of its troubled overseas property projects. It came out of property development projects in Hubei, China, and Jeju, South Korea, bruised.
In December 2018, Tan spelt out his plans to unlock value and sweat the assets of the group. The restructuring essentially involved the reshaping of Berjaya Land Bhd (BLand), consolidate 7-Eleven Malaysia Holdings Bhd at the Berjaya Corporation level and see through the long-spoken-about listing of U-Mobile Sdn Bhd.
Analysts felt that a delisting of asset-rich BLand would pave the way for the re-listing of its hotels and resorts group in Singapore. The plan started with the sale of Berjaya Corp’s hotels in Kyoto, Japan — a deal that was completed at RM1.87 billion last June — to supposedly give it the financial muscle to consolidate its position in 7-Eleven and BLand.
However, the crucial part of the restructuring, such as the listing of its property assets in Singapore and U-Mobile in Malaysia, had yet to be implemented when Tan announced that an outsider would take over the helm of Berjaya Group as CEO.
Abdul Jalil Abdul Rasheed was appointed on March 16. He comes with a record of being the shortest-serving CEO of Permodalan Nasional Bhd. He left PNB unceremoniously last June, after serving less than nine months as head of the RM300 billion fund.
Abdul Jalil, who was appointed under the Pakatan Harapan regime, resigned after he was criticised for allegedly misrepresenting his academic qualifications.
Within two weeks at Berjaya Group, Abdul Jalil had forked out some RM41 million to accumulate a stake of 2.7% in the conglomerate, which is rather unusual for a group CEO. His aggressive purchase of the shares on the open market is perplexing as, normally, the group CEO would be rewarded by way of share options. His rationale is that, by having a stake in the company, he is aligning his interests with that of shareholders. But what really counts is that Abdul Jalil finishes what Tan had set out to do in December 2018 — enhance shareholder value.
Tan says the appointment of Abdul Jalil paves the way for Berjaya Group to be managed by professionals.
Would that really be the case? Family-owned businesses hardly see an outsider running the show as most of the time it is because the patriarch or matriarch, having built the business empire generally, finds it difficult to let go. Studies also show that self-made entrepreneurs generally do not have much faith that their successors will do as good a job as they have.
This is one of the reasons that Rupert Murdoch, at the age of 90, has yet to find a successor for his media and entertainment empire, which stretches from Australia to the US.
There are several other tycoons who do not have a next-in-line to their business empire. Ananda Krishnan does not have a successor to his businesses involving entertainment, telecommunications and oil and gas. His only son has chosen to lead a life at a monastery. Public Bank’s Tan Sri Teh Hong Piow also has no replacement to run his bank.
For the longest time, Malaysia’s richest man, Robert Kuok, did not seem to have a clear successor as there were many candidates within the Kuok fold. However, a younger son — Khoon Hwa — has been appointed to several boards of the group and is now touted as his successor.
Each family-owned business empire has its own dynamics. And it is not true that the second generation or third generation do not share the same affinity as the patriarch or matriarch for the business.
Generally, the patriarch or matriarch does not name a successor too early because of the fear of losing control and of giving rise to conflict within the family.
Wealth alone does not bind a family together. It makes it easier for the family to stay together without having to worry about financial commitments.
Back to Berjaya Group. Tan has several children working in the group. In the future, there is always a chance that one of them may take over the mantle from Abdul Jalil.
Even now, Tan and Robin are in positions of authority to guide the management through the restructuring. Tan is the executive chairman and Robin is the deputy executive chairman.
Business-wise, Berjaya Corp has amassed 86% in BLand. Securing the minorities’ approval to privatise the company can be difficult unless the price is right.
As for 7-Eleven, its reach increased after its takeover of Caring Pharmacy Bhd. Also, 7-Eleven has a 46% stake in bike e-hailing service Dego Rides, which is popular in neighbouring countries but has not been approved in Malaysia yet.
7-Eleven’s margins are narrow, owing to the cut-throat retail market, raising doubts whether it is worth more than RM1 billion, as estimated by Tan.
As for U-Mobile, the government’s decision to have a special-purpose vehicle own the bandwidth and build the infrastructure for 5G should work in its favour if it veers towards a listing.
The Covid-19 pandemic has probably awakened Tan to the reality that he needs to unlock value in the group’s assets and find a successor. At the moment, he has not succeeded in unlocking value. For Abdul Jalil, it is still early days.
M Shanmugam is contributing editor at The Edge