The UBG deal: Why Jho Low teamed up with Taib and later had to buy him out with 1MDB money

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THE disappointment that came with not being able to swing RHB Bank Bhd to Kuwait Finance House in 2006 did not stop Jho Low from turning failure into an opportunity.

With the Utama Banking Group Bhd (UBG) sitting on a huge cash pile of RM2.23 billion paid to it by the Employees Provident Fund (EPF), which bought RHB Bank/RHB Capital Bhd, Jho Low moved quickly to connect with the then chief minister of Sarawak Tan Sri Taib Mahmud, whose family controlled UBG through Cahaya Mata Sarawak Bhd (CMS).

Sources say Jho Low promised that in return for allowing him to buy a substantial stake in UBG, he would help bring in powerful investors from the Middle East to help drive what was then Taib’s pet project, Sarawak Corridor of Renewal Energy (SCORE), which needed billions in investment.

Jho Low arranged for Taib to meet his friends and business associates linked to the governments of various Middle East countries, and the latter was impressed.

An action plan was quickly put in place, which first saw Swan Symphony Sdn Bhd — owned by  Abu Dhabi Kuwait Malaysia Investment Corp (ADKMIC), in which Jho Low has a stake, buying a  49% stake in Putrajaya Perdana Bhd from E&O Bhd for RM198 million in August 2007.

This was followed in November by the purchase of a 45% stake in Loh & Loh Corp Bhd from Vistal Achievement Sdn Bhd by another ADKMIC unit called Binary Bestari Sdn Bhd for RM111 million.

Shortly after that, ADKMIC flipped its stake in Putrajaya Perdana for RM332 million and in Loh & Loh for RM124 million cash to UBG. This quick flip within a few months made Jho Low and AKDMIC a profit of RM147 million.

On the same day in Jan 31, 2008, UBG also made a restricted offer of 183 million shares to Majestic Masterpiece Sdn Bhd (owned by Jho Low) for RM456 million cash or RM2.50 a share.

The game plan that Jho Low pitched to Taib and UBG was not just SCORE, but also that UBG, via its two newly acquired contruction units Loh & Loh and Putrajaya Perdana, would have major development contracts in the then emerging Iskandar Development Region in Johor.

This would be through Iskandar (Holdings) Company Ltd, which has 133 million sq ft of gross floor area to be developed in the Medini hub of  Iskandar. The original shareholders of Iskandar (Holdings) were Mubadala Development Company PJSC and Aldar Properties PJSC from Abu Dhabi,  Saraya Holdings from Kuwait/Saudi, and Butamba Investment.

Butamba is the investment vehicle of Wynton Group Global Ltd, which is owned by Jho Low.

Iskandar Holdings formed a consortium called Global Capital and Development Sdn Bhd. In that consortium were Iskandar Holdings (60%), Iskandar Investment Bhd (owned by Khazanah and the Johor state government) with 30% and Alpha (Five) Ltd with 5%.

Sources say Jho convinced UBG to take a stake in Global Capital by placing RM350 million in an asset management company called Unity Capital Partners, which would then buy out his stake held via Butamba. Jho and his associate Tan Vern Tact were directors of both Global Capital and UBG. Jho Low also put another associate Geh Choh Hun at various times on the board of UBG, Putrajaya  Perdana,  Loh & Loh, Global Capital and Javace Sdn Bhd.  Jho Low made a tidy profit by selling his stake in Global Capital to Unity Capital and this was said to have infuriated Taib (see “Jho Low made RM400 million by quick flip of Iskandar land deal”).

In July 2008, UBG spent its remaining cash by buying shares in Putrajaya Perdana and Loh & Loh that it did not already own for RM343 million and RM205 million respectively.

Sources say ties between Jho Low and the Taib Mahmud family started to become strained after the outbreak of the global financial crisis in 2008 and the money flow for investments into SCORE as well as Iskandar from the Middle East did not materialise.

What made matters worse was the fact that virtually all the cash UBG got from the sale of RHB Bank were virtually all spent because of UBG’s  acquisition spree totalling RM1.35 billion, based on the game plan drawn up by Jho Low, who by then had his key people like Nik Faisal Ariff Kamil, Jasmine Loo and Tiffany Heah firmly in the management of UBG.

Nik Faisal and Loo subsequently joined 1Malaysia Development Bhd (1MDB), and together with Heah and  Seet Li Lin were Jho Low’s main assistants in helping him influence and execute decisions at 1MDB.

To ease the tension with the Taib family, Jho Low, with help from his PetroSaudi International buddy Tarek Obaid, then decided to take over all of UBG to enable the then chief minister’s family to exit the company completely.

The move started in January and when news reports speculated that 1MDB would be involved and that it was a bailout of Taib, Tarek became angry and told off PetroSaudi International’s CEO for mergers and acquisitions Patrick Mahony for failure to manage the news flow. Various exchanges of emails then showed Jho Low deciding that no information was to be provided to journalists without going through Mahony and the appointed PR consultant.

To fund the privatisation that cost RM1.4 billion, PetroSaudi International (Seychelles) Ltd used a combination of cash from 1MDB and a RM700 million loan from AmInvestment Bank Bhd.

Mahony flew to KL where he had meetings with the top executives of Loh & Loh, Putrajaya Perdana and UBG. He also had meetings with senior bankers from AmInvestment and Affin Bank to discuss the loan facility. Sources say that a person identified as “Shaikh” sat in the meetings with the banks and was said to be a deal facilitator.

Interestingly enough, executives of Cahaya Mata Sarawak wanted to meet Mahony when he was in Kuala Lumpur in January 2010, but failed to do so. CMS chief financial officer Syed Hizam Alsagoff had emailed Mahony for a meeting with CMS deputy chairman Datuk Abu Bekir Taib and executive director Datuk Syed Ahmad Alwee Asree.  Bekir  is  Taib Mahmud’s son, and Syed Ahmad, his son-in-law.

Mahony had forwarded the email request from CMS to Jho Low who replied: “Just say that your travel plans schedule is uncertain yet but you will decide on due course and let them know. Likely Feb/March.”

While this was going on, PetroSaudi International already got 1MDB to subscribe to a new issue of US$500 million in Murabaha notes. Based on documents sighted by The Edge, US$260 million (RM850 million) made its way in September 2010 to its Malaysian unit Javace Sdn Bhd, which had made a general offer to buy all of UBG.

By December 2010, the business relationship between Jho Low and the Taib family ended with the latter receiving RM465 million.

Over the next few years, Jho Low and Javace started selling all the assets of UBG.

Loh & Loh was sold to Selesa Produktif Sdn Bhd and Putrajaya Perdana was sold to Cendana Destini Sdn Bhd on the same day — Sept 14, 2012.

Cendana Destini’s main shareholder is Datuk Rosman Abdullah, who was formerly with Malaysia Airport Holdings Bhd.

Putrajaya Perdana  subsequently saw the emergence of the Lembaga Urusan Tabung Haji (LUTH)  as a 30% shareholder. LUTH CEO Tan Sri Ismee Ismail is a director of 1MDB. It is not known how much LUTH paid for the stake.

In April 2014, Putrajaya Perdana bought a 37.5% stake in Iskandar (Holdings) Company Ltd for RM240 million.

Between 2011 and 2012, UBG paid RM540 million in dividend and capital repayment to Javace.

In June and August 2014, Javace and UBG were wound up voluntarily, closing one chapter in an intriguing story about a 30-something-year-old who combined his political connections in the Middle East and Malaysia with his sharp eye for opportunities to do complex multi-billion ringgit deals which have started to unravel, including at 1MDB.

Another interesting point to note is that UBG’s auditors before Jho Low came in was Price Waterhouse Coopers in FY2007 but for FY2008, FY2009 and FY2010, it was Ernst & Young before KPMG took over for FY2011 and FY2012; it was a similar pattern at 1MDB, where KPMG signed off the FY2010 accounts after E&Y withdrew and continued in FY2011 and FY2012 before it decided to quit the account which was then taken over by Deloitte from 2013.


This article first appeared in The Edge Malaysia Weekly, on March 9 - 15, 2015.