Arul Kanda has done it again. This time all the so called ‘success’ in selling off the national assets just to pay off the billions of loans they could not repay was quickly negated by their Chinese buyer merely 4 days after the ‘big announcement’. Again and again, 1MDB is exposed as a dishonest company whose words cannot be trusted.
China Railway Group, whose subsidiary the China Railway Engineering Corporation (M) Sdn Bhd had announced that they will only pay RM2.64 billion of the total RM5.28 billion selling price of the Bandar Malaysia equity.
This ran contrary to the statement 1MDB had earlier made:
The 1Malaysia Development Berhad Group (“1MDB”) today executed a Share Sale and Purchase Agreement to sell 60% of the equity in Bandar Malaysia Sdn Bhd (“BMSB”) to a Consortium comprising Iskandar Waterfront Holdings Sdn Bhd (“IWH”) and China Railway Engineering Corporation (M) Sdn Bhd (CREC).
The IWH-CREC Consortium has valued 100% of the Bandar Malaysia land at RM 12.35 billion. Accordingly, its 60% share of land will cost RM7.41 billion. 1MDB will receive a 10% deposit of RM741 million upon execution of the Share Sale and Purchase Agreement, with completion of the transaction expected by end June 2016.
The selling price if we were to take 1MDB’s announcement is fixed, which is supported by RM741 million as 10% deposit upon signing the S&P agreement.
There is no doubt that the public would have understood that the final selling price is indeed RM7.41 billion. There was no mention that the amount will be adjusted. And of course, in their earlier statement, they had explicitly mentioned that the RM7.41 billion is on the sale of equity in Bandar Malaysia Sdn Bhd (BMSB); which owns 486 acres (approximately 2 million square metres) in Sungai Besi – land originally owned by the Government.
Certainly CREC also did not mention that the RM5.28 billion was on land valuation. It specifically said:
On 31 December 2015, the Joint Venture entered into the Share Sale Agreement with 1MDBRE, pursuant to which the Joint Venture will purchase 60% of the equity interest in BMSB held by 1MDBRE at a price of MYR5.279 billion, among which CRECM will pay MYR2.639 billion (equivalent to approximately to RMB3.995 billion) of the share purchase price.
Then, why on earth did 1MDB today suddenly release a press statement saying that “the valuation contained in the announcement made by CREC to HKEx refers not to the land sale valuation, but instead to their estimated share of the net equity value of the Bandar Malaysia project, based on certain assumptions, which are subject to further negotiations during the Completion period between January and June 2016.”?
That was precisely why the public was asking the question – Why did you announce a different figure in the sale of equity from what CREC had approved and committed by their Board of Directors on 31st December 2015?
Unless 1MDB did not receive the memo or their corporate communications staff were probably too drunk during the new year’s eve festivities, here is the copy of CREC’s announcement:
It seems RM5.28 billion is the total and the final amount agreed by the Board of Directors in China Railway Group , the parent company of CREC, of which 50% of it (RM2.64 billion) will be paid by them to 1MDB.
Is 1MDB effectively saying that CRG had misled the Hong Kong regulatory bodies?
Or did 1MDB had misled its stakeholders – the Malaysian public by furnishing unverified amount? But in their statement, they blamed other people in questioning the discrepancies of figures. What kind of public relations strategy is 1MDB trying to execute?
On another note, why is CRG paying 50% of the purchase price when their ownership in the Consortium is said to be only 40%? This is another mystery which 1MDB will almost definitely label it as ‘this is just a recycled allegation so we won’t bother answering it’.
If ever there was a case study in crisis management, 1MDB’s corporate comm department should be set as an example on ‘things a company should not do in public relations’.
Now before anyone gets confused, the Chinese company and its partner, IWH is buying 60% ownership of BMSB. That means it has the majority control and ownership of the whole 486 acres of land in Sungai Besi.
They did not buy 60% of 486 acres. They bought to become the majority owner of that whole 486 acres of land in Sungai Besi. Can you imagine the size of 486 acres of land?
It is huge.
In order to appease the ignorant public, 1MDB and their army of paid sycophants had the cheek to say that the majority shares in Bandar Malaysia will still be owned by the Government. This is again, misleading.
Lets look at the ownership of Bandar Malaysia now:
40% – 1MDB
60% – CREC & IWH Consortium
Majority of Bandar Malaysia is now in the hands of private sector.
Breakdown of CREC & IWH Consortium:
40% – CREC
60% – IWH
Majority of the Consortium is owned by IWH, a private + Johor state venture.
60% – owned by Lim Kang Ho via Credence Resources
40% – owned by Kumpulan Prasarana Rakyat Johor Sdn Bhd
Therefore, in reality, Lim Kang Ho owns the controlling stake in Bandar Malaysia Sdn Bhd. And since he is the private sector and controls the majority shares in IWH, what will stop him from selling more shares to foreigners? Obviously 1MDB and Kumpulan Prasarana Rakyat Johor Sdn Bhd are insignificant shareholders in this deal.
Lim Kang Ho through his Credence Resources can easily team up with CRG and swallow the whole BMSB.
This is why the public have asked 1MDB to disclose its Sale and Purchase agreement because it is a matter of public interest but 1MDB quickly dismissed it as an attempt to ‘undemine’ the sale. Such siege mentality had not been witnessed since Troy was ransacked by the Greeks.
What is the guarantee that the whole Sungai Besi land won’t fall into the hands of foreigners? The risks are there but to 1MDB and its top advisor, since the land they are selling is only belonged to the public but not their own, it is okay to sell it off, just so that they could pay off their debts.
This is just like the case of Edra Global Energy where they sold it to foreigners on what was once belonging to Malaysians and the Government. 1MDB is just selling off their assets just to pay back the loans they have massively and wastefully acquired.
But of course, the idiots in Umno will not understand the consequences. Not even the once boisterous Pemuda Umno made a squeak. Perhaps they are more busy chatting in Whats App groups as which Pemuda exco should be made a minister in the next Umno/General elections.
Usually when we hear people selling off their assets (houses, cars, land) just to pay off their gambling debts, we would not have imagined it would be on a huge national scale. This usually happens to commoners which had made bad decisions in life, and had fallen into difficult times. Destitution due to gambling debts is not uncommon.
But in the case of 1MDB, they asked people to be with them and to support them as they sell off all the crown jewels just to keep afloat. We would have expected 1MDB to pay off their debts via their profits. But at the end of the day, they had mismanaged their debts, caught themselves in financial distress, unable to fulfill all their original objectives when they set up the company, forced to admit that the company is a failure with the business model being too idealistic but, eventually had shamelessly telling the public that the process of selling off national assets just to pay off their debts is a success!
Truly, why do we deserve this kind of leadership?
P.S.: As predicted, a nameless sychophant threw in his only defence against this article – that Malaysian Government holds the majority stake in Bandar Malaysia.
To summarise this is their argument:
1. CREC 40% of 60% is 24%
2.. LKH 60% of 60% of 60% is 21.6%
3. KPRJ 40% of 60% of 60% is 14.4%
4. 1MDB 40%
Therefore, Malaysian government still own 54.4% (40% + 14.4%) of Bandar Malaysia. This is just like how 1MDB tries to hoodwink the public. But just as the article above shown, this is not the case.
It doesn’t work that way in corporate world.
As explained in this article, Lim Kang Ho controls the Board of IWH through his majority shareholding thus effectively controls the Consortium because IWH has 60% of ownership. Since he controls the Consortium, he controls the Board of BMSB. Doesn’t matter who owns how much percentage. Amateurs will look at the percentages as if they mean something. In reality the one that controls the BOD at each level of the company holds the power. How can 1MDB with only 40% ownership exert control over BMSB? And how can Johor state with only 40% stake in IWH exert control over IWH? In addition, it has much less say in CREC-IWH! In conclusion, the formulation that Malaysian government owns 54.4% of Bandar Malaysia is just an illusion.
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