Disastrous outing for Protasco

-A +A

AT Protasco Bhd’s annual dinner last year, executive vice-chairman and managing director Datuk Seri Chong Ket Pen was in high spirits. The reason was the entry of investor Tey Por Yee and his associate Ooi Kock Aun into the company via their acquisition of a 27.11% stake through Kingdom Seekers Ventures Sdn Bhd from Dream Cruise Sdn Bhd and FNQ Advanced Materials Sdn Bhd for RM96.51 million in November 2012.

It is understood that Chong had welcomed Tey and Ooi as substantial shareholders of Protasco in the belief that they would help look for investment opportunities for the company in a new industry — oil and gas exploration and production.

Indeed, Protasco announced on Dec 28, 2012, that it had entered into a sale and purchase agreement (SPA) with PT Anglo Slavic Utama (PT ASU) for the acquisition of 76% equity interest in PT Anglo Slavic Indonesia (PT ASI) for US$55 million. Protasco then paid a refundable deposit and part-payment amounting to RM50 million to PT ASU.

PT ASI is an investment holding company that has oil and gas assets in Aceh, Indonesia, and holds a 49% stake in PT Firman Andalan Sakti (PT FAS), which in turn has 70% equity interest in PT Hase Bumou Aceh (PT Haseba).

PT Haseba has a production management partnership agreement (PMPA) with PT Pertamina (Persero), Indonesia’s national oil company, to develop and produce oil and gas in the Kuala Simpang Timur field in Aceh.

According to those close to Chong, he believed Protasco needed a new business to maintain the group’s growth trajectory. While its construction, road maintenance and property development businesses were doing well, Protasco wanted a slice of the booming oil and gas industry.

Early this year, the company’s deal with PT ASU seemed to have got sweeter when it secured a reduction in the purchase price due to material discoveries made after due diligence was done on the latter’s assets. A second SPA was drawn up for the company to acquire 63% of PT ASI for US$22 million (RM72.04 million), less than half the original price.

The new sum was payable upon the execution of the second SPA and could be taken out of the RM50 million deposit placed on the first SPA.

PT ASU provided collateral in the form of 297.14 million shares in PT Inovisi Infracom TBK, a company listed on the Indonesia Stock Exchange. It is worth noting that Ooi is the chief financial officer of Inovisi, which is also involved in oil and gas.

One of the conditions of the deal was for PT ASU to secure a 10-year extension of the PMPA from Pertamina.

Unfortunately, PT ASU was unable to meet this requirement — Pertamina only granted it a three-year extension. On July 28, the second SPA lapsed as the terms of the deal were not fulfilled by PT ASU.

While most companies would have paid only a portion of the purchase price as down payment, Protasco had paid the full sum with an additional advance of US$5 million (RM16.37 million) to PT ASI.

According to sources, this was because PT ASI needed the money urgently to undertake exploration works, well reactivation and construction.

It is also understood that Ooi led the SPA talks because of his business experience in Indonesia. Furthermore, he had a working visa in the country.

With what seemed like a good business opportunity having ended on a sour note, Protasco is suing Tey and Ooi for breach of fiduciary and statutory duties to the tune of US$27 million (RM88.41 million).

Protasco claims that Tey and Ooi failed to disclose their interest in the transaction and conspired to defraud the company and undertake secret profit-making, according to filings with Bursa Malaysia.

protasco-table_28Nov14_theedgemarket

Protasco is also suing PT ASU for the refund of the US$22 million paid as the purchase price under the second SPA and damages arising from breach of contract as PT ASU was unable to get the PMPA extended for 10 years.

The situation grew more tense last Tuesday after Tey, through Kingdom Seekers Ventures, counter-sued Chong by filing a derivative action against him and six others (including Protasco) for the recovery of RM10 million that he alleged had been siphoned off by Protasco’s senior management.

In a press conference on the same day, Tey told reporters that he had evidence of a money trail that flowed through two layers of companies before a RM10 million cheque was drawn up and paid to RS Maha Niaga Sdn Bhd, which is allegedly Chong’s private vehicle.

Armed with documents from the Companies Commission of Malaysia, Tey pointed out that Maha Niaga’s shareholders comprised Protasco’s senior management, namely Edward Khoo Mong Wei, Lim Yew Ting, Low Kian Seng and Khor Hooi Ling.

Tey also said Maha Niaga’s registered address was the same as Protasco’s. He claimed that PT ASU had informed him that the RM10 million was Chong’s financial gain from the acquisition deal and a bitumen and coal trading contract worth RM16 million with Indonesian company PT Goldchild Integritas Abadi.

Recall that the advance Protasco had given PT ASI as working capital to undertake exploration work in order to obtain a 10-year extension of the PMPA was for RM16 million.

The charges filed by Tey came a day after Protasco announced that it was convening an extraordinary general meeting (EGM) to remove Tey and Ooi as the company’s directors.  

Note that Ooi was appointed as Protasco’s non-executive director in December 2012 upon the nomination of Tey while he, also a non-executive director, was appointed in March this year.

“Now I know the real reason for the lawsuit. It is really just a boardroom fight and they want to remove me. I have invested close to RM100 million in Protasco. I am a substantial shareholder and Datuk Seri Chong sees me as a threat,” Tey said at the press conference.

He added that two shareholders — UOBM Nominees (Tempatan) Sdn Bhd, with an 8.99% stake, and Tan Heng Kui (1.52%) — wanted to have him removed from the Protasco board.

Tan is Protasco’s non-independent non-executive director with a 1.72% stake in the company as at April 25.

Tey claimed that Chong was behind the proposal to oust him and Ooi from the board.

Chong has so far maintained his silence. However, a source close to him said the feud was not just a boardroom tussle. He adds Tey had failed to uphold his fiduciary duty as a director of Protasco by not declaring that he had an indirect interest in the deal to acquire PT ASU.

“Chong set up an investigation committee to look into the matter. The committee found out that PT ASU was actually linked to Tey’s close associates.

“Tey should have declared that when the deal was being negotiated. All the directors of Protasco were made to sign a statutory declaration to say they had no personal interest in the deal.”

According to Tey, the RM10 million trail went through PT Nusantara Rising Rich, Fast Global Investments Ltd and Telecity Investments, apart from PT Goldchild, before reaching RS Maha Niaga.

He claimed that neither he nor Ooi was a director of any of the companies involved in the RM10 million. He said at the press conference that he did not even know the owners of the companies.

However, according to a source, PT Goldchild’s major shareholder with over 50% equity interest is PT Inovisi Infracom, of which Ooi is the CFO. Apart from that, Tey has close associates in these companies.

As for the RM10 million that was allegedly siphoned off by Chong through RS Maha Niaga, the source says it was a loan repayment by Protasco’s Indonesian counterpart on the RM16 million advance. “Protasco gave a RM16 million loan as working capital to PT Goldchild Integritas Abadi, whose major shareholder is PT Inovisi Infracom.”

Ooi has interests in Nexgram Holdings Bhd (14.07%) and Ire-Tex Corp Bhd (7.16%), companies in which Tey is the largest shareholder with stakes of 27.67% and 24.67% respectively.

Tey has continued to make public statements on the dispute while Chong has kept mum. In fact, last Thursday, the former called for an EGM to be held on Nov 28 to remove Chong as a director of Protasco.

Then on Friday, Tey said Protasco’s board had, at a meeting on the same day, refused to table resolutions to look into Chong and the missing RM10 million.

Protasco made an announcement to Bursa on Friday that at the board meeting to discuss the requisition for an EGM to remove Tey and Ooi as directors, it was resolved that the EGM will be held on Nov 26.

What had started out as a simple diversification into the booming oil and gas industry in 2012 has turned into a disaster for Prostaco. As the accusations continue to fly, and when the cases finally get heard, will the truth be revealed?

protasco_28Nov14_theedgemarket

This article first appeared in The Edge Malaysia Weekly, on November 3 - 9, 2014.