Syed Mokhtar’s firm allowed to proceed with suit over SFI takeover

This article first appeared in The Edge Financial Daily, on October 23, 2019.
Syed Mokhtar’s firm allowed to proceed with suit over SFI takeover
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KUALA LUMPUR: Tycoon Tan Sri Syed Mokhtar Albukhary-linked company Pelangi Prestasi Sdn Bhd has been allowed by the High Court to proceed with its suit against two parties in relation to its proposed takeover of Sabah Forest Industries Sdn Bhd (SFI).

Justice Datuk Ahmad Bache yesterday dismissed the striking out application by Lee & Man Paper Manufacturing Ltd and Grant Thornton Consulting Sdn Bhd.

Pelangi’s counsel Datuk Lim Chee Wee, who relayed the decision to The Edge Financial Daily, said the court had fixed Dec 7 to 10 as hearing dates of the suit.

Lim said Justice Ahmad had also allowed an injunction application by Pelangi to restrain the implementation of a new set of preconditions to grant timber licences by the Sabah government.

Lee & Man Paper is a China-based company appointed by the Parti Warisan Sabah-led state government to take over SFI, while Grant Thornton is a tax and accountancy firm.

In April 2018, Pelangi signed an agreement to acquire a 98% stake in SFI from India-based pulp and paper manufacturer Ballarpur Industries Ltd for about RM1.2 billion. Under the deal, Pelangi would assume control of SFI, including all its assets, land titles and timber licences.

SFI, which was facing financial problems, was put under receivership and management of Grant Thornton before the agreement was signed.

Pelangi subsequently went to court over a decision made by the new Sabah government — after the 14th general election in May 2018 — not to issue fresh timber licences to SFI and instead impose an entirely new set of preconditions for granting the licences.

A month before the signing of the agreement, the previous Barisan Nasional state government agreed to approve new timber licences for Pelangi if it fulfilled the prerequisites in the agreement.

Pelangi, in its suit, claimed that it had paid the salaries of SFI employees in full since March 2018, including shortfalls in the period of January to March 2018.

The salaries, it said, were paid even up until March this year, amounting to RM23.1 million, and hence it had fulfilled part of the prerequisites set by the Sabah government.