This article first appeared in The Edge Malaysia Weekly on April 25, 2022 - May 1, 2022
ON Aug 24, 2018, Sapura Energy announced a RM4 billion rights issue to strengthen its balance sheet. It did not stem the bleeding of red ink, unfortunately, but led to Permodalan Nasional Bhd (PNB) becoming the company’s single largest shareholder with a roughly 40% stake — with huge losses.
The bigger question is, why did PNB get so deeply involved in Sapura Energy — when it did not have to in the first place? Let us follow the shareholding trail.
Sapura Energy’s cash call involved a RM3 billion rights issue of 9.987 billion shares priced at 30 sen each on a 5-for-3 basis, with 1 free warrant for every 10 rights shares subscribed. Another RM1 billion was raised through the issue of 2.397 billion Islamic redeemable convertible preference shares (RCPS-i), offered on the basis of two RCPS-i for every five shares owned, priced at 41 sen each. The RCPS-i are convertible into ordinary shares on a 1-for-1 basis upon maturity on Jan 29, 2024.
The RCPS-i were fully subscribed but the rights issue was undersubscribed by 18.5%. They were fully underwritten, though, by the three joint underwriters, Maybank Investment Bank, CIMB Investment Bank and RHB Investment Bank, who ended up with 1.85 billion Sapura Energy shares worth RM554 million, equivalent to a nearly 12% stake. It is unclear if PNB acquired these shares too, as it would have been difficult for the banks to dispose of them in the open market without huge losses.
President and CEO Tan Sri Shahril Shamsuddin had given an undertaking to subscribe in full the rights shares with warrants and to subscribe for excess rights shares for a value of not less than RM20.5 million. Shahril and his related parties (Sapura Technology Sdn Bhd, Jurudata Sdn Bhd and Uniphone Telecommuncations Bhd) took up 1.772 billion shares at a cost of RM531.6 million, allotted on Jan 24, 2019 — or 17.7% of the rights shares. On April 9 and 10, 2019, however, he sold a total of 600 million shares at 31 sen for RM186 million.
On Jan 29, 2019 (completion and listing date, and five days after the allotment of shares to other parties), Amanah Raya Trustee – Amanah Saham Bumiputera (ASB), a PNB fund, acquired 3.916 billion shares through the subscription of rights and excess rights. This gave it a total stake of 4.302 billion shares or 26.9%. ASB bought another 10 million shares on April 15, 2020, and 203 million shares on Nov 23, 2020, giving it a total of 4.516 billion shares or a 28.3% stake.
What is interesting is that prior to the rights issue, ASB held only 387 million shares, or a small 6.46% stake in Sapura Energy. Based on this, it was entitled to 645 million shares under the rights issue. But ASB acquired a whopping 3.916 billion shares for RM1.17 billion — or six times its entitlement. ASB also owned 87.1% of the RCPS-i, with PNB-related funds owning over 98% of outstanding RCPS-i.
In total, PNB invested RM2.7 billion into Sapura Energy via the rights issue. From a stake of reportedly only 12.2% before the rights issue, PNB funds ended up with about 39.6% of ordinary shares and over 98% of the ICPS-i. PNB has since lost almost 90% of its investment undertaken just during the rights issue, excluding its earlier stake.
Why were all these decisions made at PNB for what was earlier a very small investment in Sapura Energy, when it was already clear the company was running into a business and financial crisis?
For the record, Sapura Energy’s rights issue was announced to Bursa Malaysia on Aug 24, 2018. PNB’s then president and CEO was Datuk Abdul Rahman Ahmad. Tan Sri Abdul Wahid Omar was PNB’s group chairman from Aug 1, 2016, to June 30, 2018, when he resigned and was replaced by Tan Sri Zeti Akhtar Aziz, who held the post from July 1, 2018 to April 30, 2021.
There were various changes to PNB’s board in the second half of 2018 and January 2019. The board of directors around August 2018 comprised Zeti, Abdul Rahman, Datuk Dr Mohd Yaakub Johari, Datuk Soedirman Aini, Tan Sri Ali Hamsa, Tan Sri Wan Abdul Aziz Wan Abdullah and Tan Sri Zarinah Anwar.
PNB’s board of directors reports to Yayasan Pelaburan Bumiputra, which was established in 1978 to promote bumiputera share ownership in the corporate sector.
Back in June 2018, Yayasan Pelaburan Bumiputra’s board of trustees was restructured to comprise Tun Dr Mahathir Mohammad (the then prime minister), Datuk Seri Mohd Azmin Ali (then minister of economic affairs), Zeti (then PNB group chairman) and Tan Sri Ambrin Buang, the former auditor-general.
Although the rights issue was announced in August 2018 and after the board changes at PNB and the Yayasan, it was very likely that the plan was devised much earlier under the previous boards, as a big restructuring cannot be done so quickly.
When president and CEO Abdul Rahman left PNB at the end of his contract in September 2019, Jalil Rasheed took over but left after a short nine months in June 2020. During his tenure at PNB, he was also chairman of Sapura Energy, mandated to turn it around.
Jalil and Shahril were known to be at loggerheads over various issues at Sapura Energy.
Shahril retired as Sapura Energy’s group CEO on March 22, 2021, after helming the group for 25 years.
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