Tanjung CEO holding out an olive branch to Tan

-A +A

NEWLY appointed group CEO and executive director of Tanjung Offshore Bhd Rahmandin Shamsudin is holding out an olive branch to suspended director Tan Sri Tan Kean Soon.

“Once we can agree on some terms with him (Tan), we will drop all the lawsuits,” Rahmandin told The Edge last Monday, referring to a multi-million ringgit defamation suit and injunction against Tan and a few others.

When asked again on Friday, Rahmandin reiterated his intention to mediate between Tan and the company, even though Tanjung had stepped up legal action against Tan and the others the previous day, with the latest suit seeking compensation for certain alleged breaches.

Interestingly, Rahmandin said he had not been informed of the suit filed on Thursday, as it was done by the company’s independent committee, of which he is not a member.

The legal woes started when Tan, director Muhammad Sabri Ab Ghani and paid adviser Datuk Harzani Azmi were suspended from their roles in late January this year after the independent committee concluded its investigation and pointed to alleged breaches by the said parties.

The independent committee was formed by three directors of Tanjung. However, it is worth noting that Rahmandin was not involved with Tanjung at the time. He was only appointed group CEO and to the board on Feb 12 after he emerged as the single largest shareholder with a 9.99% stake or 37.18 million shares, which he had purchased on Feb 11 from undisclosed parties.

After the interview with Rahmandin last Monday, The Edge spoke to Tan on Thursday. He said that he was open to talks with Tanjung’s management but insists that the company should engage forensic accountants to review past deals in order to clear his name.

On the same day, Tanjung announced to Bursa Malaysia that it had filed a legal suit at the Kuala Lumpur High Court against Tan, Sabri, Harzani and HMS Oil & Gas Sdn Bhd for breach of duty. Tanjung is specifically seeking orders for Tan, Sabri, Harzani and HMS (said to be connected to Tan) “to render an account and disgorge of all gains, benefits, enrichment or otherwise having arisen, accrued or been derived either directly or indirectly from their said breaches”, and demanding that they pay special damages of RM1.07 million to Tanjung in relation to the “Bourbon Corporate Exercise”.

Tanjung had sought an order for Harzani to pay special damages of RM125,489 in relation to the “EPDM project”. It had also asked for an injunction to restrain Tan, Datuk Dr Nik Norzrul Thani Hassan Thani and Datin Norhafizah Mohd Nordin from holding an extraordinary general meeting (EGM) on March 27.

When asked about Rahmandin’s intention to talk, Tan said, “If it is in regard to the defamation case, it can be [talked over] on a personal discussion level, but in regard to the wrongdoings [on several deals], it (the investigation) has to be continued.” On Feb 26, Tanjung filed a defamation suit against Tan, Nik Norzrul Thani, Norhafizah, Datuk Rosman Hassan, Datuk Norazman Hamidun, Datuk Maheran Mohd Salleh and Tan Sam Eng, seeking a total of RM380 million in damages (it is seeking RM200 million from Tan). Apart from Tan and Norhafizah, the other defendants are candidates that Tan seeks to appoint to Tanjung’s board at the March 27 EGM.

Tan is the third largest shareholder of Tanjung with a 7.58% stake, after Rahmandin’s 9.99% and Lembaga Tabung Haji’s 7.99% interest.

Apart from the legal suits, Tanjung has also filed reports with the police, Bursa Malaysia and the Securities Commission Malaysia (SC) on the independent committee’s findings against Tan, Sabri and Harzani. This would make it difficult for the trio to put the matter behind them even if there were an out-of-court agreement.  

Legal tangle

To recap, the independent committee, comprising George William Warren Jr (independent non-executive director), Datuk Ab Wahab Ibrahim (non-executive director) and Shahrizal Hisham Abdul Halim (independent non-executive director), was formed shortly after a planned reverse takeover (RTO) exercise with Paris-based Bourbon SA was aborted last December.

The committee alleged that Tan and Sabri were involved in a conflict of interests and breaches of duty, and that there were deficiencies in processes where Harzani was concerned.

One of the main allegations is that Tan and Sabri had approached Bourbon for a vessel contract via Tan’s private vehicle HMS Oil and Gas, when the heads of agreement was being signed between Tanjung and Bourbon on the RTO exercise. The independent committee alleges that such action may have resulted, among other things, in a “loss of business opportunity and potential income stream related to the Bourbon deal”.

When asked about this, Rahmandin said, “I don’t think that is the reason the [Bourbon] deal did not go through. It was a small contract of one vessel; that was not the main reason.”

During the interview with The Edge, Tan argued that if Tanjung was prohibited by law from participating in the vessel contract due to a moratorium imposed by Ekuiti Nasional Bhd (Ekuinas), the vessel deal by HMS could not be perceived as a diversion.

Back in 2012, Tanjung sold its marine services business to Ekuinas for RM220 million and signed a three-year non-compete clause, whereby it agreed that it would not re-enter the offshore vessel market for that period.

Tan also said the vessel contract would not have jeopardised Tanjung’s RTO deal with Bourbon. “I don’t think so. Bourbon has about 500 vessels altogether, how would this one vessel jeopardise the whole deal [RTO]?”

Tan also has a problem with Tanjung’s management, of which he is not a part, being a non-executive director. He said Tanjung had incurred

refurbishment costs of £4.8 million (RM26.64 million) for a property in Birmingham, the UK (which was acquired in March last year), without the consent of the shareholders.

According to him, together with the initial acquisition cost of £6.7 million, the total investment in the Birmingham property exceeded 25% of the company’s net assets value, which would require shareholders’ approval. He reasoned that the acquisition and refurbishment costs should be viewed as a single investment as both transactions were incurred within a 12-month period.

Rahmandin said he and Tan had actually sat down to talk after his appointment as CEO on Feb 12. “We have a very cordial relationship. But as we went further into the details, there was a breakdown in negotiations.”

In fact, Rahmandin himself is up for removal alongside the three directors in the independent committee. He was appointed to Tanjung on the same day that Tan and several other shareholders requisitioned for an EGM to be held on March 27 to remove him and the three directors.

The single largest shareholder, Rahmandin declined to disclose whom he had bought the shares from. Of the three directors that Tan is seeking to remove, only Warren Jr holds shares in the company. He has a 0.25% stake.

Parties who hold meaningful stakes but have unknown positions include Tanjung’s executive director Eric Tan Wee Koh, who holds a 0.29% stake, and Lembaga Tabung Haji, which has a 7.99% stake. Meanwhile, there is a group of 23 minority shareholders who are said to hold more than 6% in Tanjung. The group is said to be led by one Michael Azizeu.

Based on meetings with the pilgrim fund, Rahmandin said Lembaga Tabung Haji appeared very neutral on the matter. “They are more interested in the business and shareholders’ interest, not the conflict. They will probably abstain from voting [at the EGM].”

He added that he would like to avoid the EGM if possible, preferring to work things out in a non-hostile manner. He believes that the conflict so far has been a personality clash.

According to Rahmandin, Harzani has already resigned as adviser, while Sabri has indicated that he too will resign from the board.

“I came in after all these things had been done. The right thing to do is to speak to the three of them [Tan, Sabri and Harzani], find out more and hold out an olive branch,” he said.

But would it be in the interest of shareholders to retain the said officials after Tanjung’s own board had accused them of questionable conduct?

Contrary to what Rahmandin believes, Tan says Lembaga Tabung Haji will be present at the upcoming EGM. He has proposed to appoint Nik Norzrul Thani, Rosman, Norazman, Maheran and Tan Sam Eng as new directors.  

Tan may not be alone in the battle. Last Thursday, Azizeu filed a police report on the alleged irregularities in the Birmingham deal.

When contacted by The Edge, Azizeu said Tanjung Offshore Minority Shareholders (TOMS) is on the side of good governance and wants the truth about the deals.

“We want the EGM because we never had a chance to ask the board and management about the transactions,” he said.

Should Tan vote the said directors out, he says he will be more actively involved in Tanjung’s day-to-day operations. And he will welcome a representative from Lembaga Tabung Haji to the board.

Nonetheless, it remains to be seen what will transpire during the EGM. Or will there even be one? “Depending on the terms of the agreement, both parties should rationally consider dropping all suits, including [calling off] the EGM,” said Rahmandin last Friday.

Tanjung (fundamental: 1.85; valuation: 0.60) closed one sen lower at 51.5 sen last Friday, with a market capitalisation of RM199 million.

 

This article first appeared in The Edge Malaysia Weekly, on March 23 - 29, 2015.