This article first appeared in The Edge Malaysia Weekly on November 18, 2019 - November 24, 2019

THERE has been a new twist to the London Biscuits Bhd saga, even as the troubled confectionery maker continues to default on its bank loans. Bursa Malaysia filings on Nov 12 show that a new shareholder has emerged.

Sydney-based MembersOne Ventures Fund has acquired a substantial stake of 11.35% in London Biscuits. A search online shows this fund was established in 2017. But there is no mention of the directors or the investment team involved in the fund. Attempts to contact the fund via email were not successful.

“It is odd that a new shareholder would want to enter into the company at a time like this,” comments a market observer.

London Biscuits is facing a winding-up petition and on Oct 23, the court appointed Lim San Peen of PricewaterhouseCoopers Advisory Services Sdn Bhd as interim liquidator. It is worth noting that, thus far, the company has not contested the appointment.

In various announcements, the company has said it is “assessing the situation” subsequent to the appointment of the interim liquidator.

Meanwhile, Meileelanusa Sdn Bhd, a private vehicle of the Liew family, has been paring down its stake in the company. From August to October, Meileelanusa disposed of 17.08 million shares, or a 5.9% stake in the company. Based on the most recent filing on Oct 15, Meileelanusa has only 7.35% equity interest, from 13.81% in late July, when it was the biggest shareholder.

Members of the Liew family have also been reducing their direct stakes in the company. As at Oct 15, Datuk Sri Liew Yew Chung, who stepped down recently as CEO of the company, had a direct stake of 0.92%, down from 1.04% as at Jan 23, 2019, as stated in its 2018 annual report.

His mother, Datin Sri Lim Yook Lan’s direct stake in the company also fell to 0.09% from 0.11% during the same period.

Sisters Datuk Liew Yet Lee and Liew Yet Mei’s direct stakes had also been reduced to 0.76% and 0.017% respectively, as at Oct 15. At the time of the 2018 annual report, Yet Lee had 1.06% equity interest and Yet Mei, 0.019%.

All of these disposals have been done via open market transactions, according to Bursa filings.

Only patriarch Datuk Sri Liew Kuek Hin and Datuk Liew Yew Cheng’s direct stakes remained unchanged at 312 shares and 32 shares respectively.

Until recently, members of the Liew family were also sitting on London Biscuits’ board but all of them have stepped down. On Sept 13, Yew Chung resigned as CEO due to burn-out stress syndrome, the company reports. He relinquished his positions on the board and executive roles in London Biscuits and all its subsidiary companies with immediate effect.

Shortly after his resignation, his brother Yew Cheng also resigned from his role as non-independent and non-executive director due to personal commitments.

Yet Lee, Yet Mei and Yook Lan, all non-independent non-executive board members, also relinquished their positions from the board on Sept 26, citing a restructuring of the board and committee members as the reason. Kuek Hin had earlier resigned on July 5 as the chairman of the company for health reasons. He is 80 years old.

If this was not enough to raise eyebrows, there were earlier resignations of board members, who had only lasted in their roles for 10 days. Loo Seng Kit, who was appointed chief financial officer on June 17, announced his resignation on June 27. Executive director Datuk Wira Ranjeet Singh Sidhu was appointed on the same day as Loo and also stepped down on June 27.

Currently, London Biscuits does not have a CEO while there are only two directors left on the board.

And it does not stop there. The winding-up petition for London Biscuits was filed by Desa Potensi Sdn Bhd. Desa Potensi is claiming RM16.41 million for the purchase of raw materials for invoices issued between April 1 and June 30.

A company search reveals that Desa Potensi’s shareholder is Kok Puh Chin. Kok was revealed as the sole shareholder of Secret Ingredients Sdn Bhd (SISB), whose related-party status was highlighted by external auditors Messrs Nexia SSY in London Biscuits’ 2018 annual report.

SISB has an operational working arrangement with London Biscuits under which it protects the know-how of the manufacturing formulae and ingredients of its products. It is worth noting that it operates within London Biscuits’ property.

The external auditors believed that the relationship between SISB and London Biscuits was indicative of a related-party relationship despite the absence of a legal connection.

However, the company’s management disagreed because of the lack of legal nexus.

Subsequently, Messrs PKF, which was appointed by the board to conduct an independent assessment of the key audit matters raised by the external auditor, concluded that SISB is not a related party due to the lack of legal nexus, but added that “the transaction between LBB and SISB was not in the commercial interest of LBB”.

To add to the complex situation, Kok is also a shareholder in candy maker Khee San Bhd, an associate company of London Biscuits. Based on Khee San’s 2018 annual report, Kok has 0.69% interest in the company.

As at Nov 15, London Biscuits had defaulted on at least RM285 million in bank loans. And more questions seem to be surfacing, one of which would certainly be whether the new substantial shareholder will be buying more shares in the troubled confectionary maker.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.