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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

TEA FOR TWO

Battle for a Great Name and Address


THE SINGAPORE FOOD AND BEVERAGE COMPANY LOST $3.2 MILLION LAST YEAR AND SAW OPERATING PROFITS DROP BY TWO-THIRDS IN 1993. So why are two Asian billionaires fighting over Yeo Hiap Seng? In control -- for now -- is the Ng family (estimated wealth: $2.7 billion). Patriarch Ng Teng Fong is Singapore's biggest landlord after the government. His eldest son Robert took over as YHS chairman last month, and the family has raised its stake in the company to 24.9%. That's just below the 25% level that would require an offer to buy out all other shareholders.

Their challenger is Malaysian banker-industrialist Quek Leng Chan (net worth: about $4 billion). He has passed the quarter-stake mark, amassing over 26% by the end of June. The cigar-puffing magnate, whose empire includes Malaysia's Hong Leong Group and Dao Heng Bank of Hong Kong, has until July 24 to publish a prospectus for a general offer. "I'm waiting to see that document," Robert Ng told Asiaweek. "Then we will respond." As of last week, Quek was keeping mum. YHS's share price has risen above S$5, valuing the business at over half a billion U.S. dollars.

So what's great about Yeo Hiap Seng? Sales reached $188 million in 1994, lifted by Yeo's brand of tea and juice, a big hit across Asia, and by YHS's Pepsi bottling franchises in Singapore and Malaysia. But the big attraction for Ng and Quek lies in its $400 million in assets. The four-hectare $300-million site of its factory in Bukit Timah, 20 minutes by car from downtown Singapore, has been rezoned for housing. "Whoever controls YHS will make a lot of money building condominiums on that site," says Joseph Lim, a Nomura Research Institute analyst in Singapore.

Robert Ng, 42, spends much time in Hong Kong, where his family's Sino Land group is one of the most aggressive developers. "The battle is still in its early days," he says of the takeover. "We've been YHS shareholders for over a year now. We are interested in the company not just because of its property but also because of its food and beverage interests."

Quek also has Singapore property interests. (His cousins, the billionaire Kweks of Singapore, control CDL, a huge real estate and hotel group with Asia-wide operations.) Analysts are now speculating that the final YHS takeover price could top S$6. "It's how badly Quek wants the company," says a merchant banker. "If he wants it badly enough because of synergy or because it fits into his group's business strategy, he might go very high."

Besides the Bukit Timah property, Quek, 51, is eyeing YHS's Pepsi franchises in Singapore, Sabah and Sarawak. He may wish to merge the bottling arms and strike a deal to unite with Peninsular Malaysia's franchisee, which had been discussing a possible merger until internal feuding at YHS took the fizz out of the talks last year.

There's more. Quek is using a joint venture named Camerlin for his takeover bid. His First Capital Corp. owns 40% of it; three other firms -- Sembawang, Haw Par Brothers International and the Salim Group -- hold 20% each. For Sembawang, a state-linked Singapore conglomerate with shipyard and real estate operations, YHS would offer a good deal. Pharmaceuticals maker Haw Par, best known for its Tiger Balm ointment, may prize Yeo's presence in China. And Indonesia's mammoth Salim Group covets a bit of everything. Owned by Jakarta billionaire Liem Sioe Liong, Salim controls UIC, a Singapore construction and property group, and Indofood, an Indonesian processed-food company which could find synergy with YHS's deep line of sauces and canned foods. Liem is also big in Hong Kong and growing in China.

Whoever loses will have plenty of spoils for consolation. The eventual buyout price is sure to be well above the YHS price just before Quek revealed his 26% holding. That should give some comfort to one family now watching on the sidelines when it could have been right in the ring: the Yeos, who began the business in 1901 in China and still own just under a third of the company, though scattered among rival members. After building the family name into a leading Asian brand in the 1980s, Alan Yeo, then YHS chairman, piloted the company into a major U.S. acquisition. In 1989 it bought Chun King, a canned-food maker, from Nabisco, then selling assets after a leveraged buyout.

With both YHS and Chun King boasting hefty sales and solid brands, the merger seemed a winner. But the $52 million price proved too rich to digest. "It was a mistake right from the beginning," argues one analyst. Nabisco had the food retailing muscle to carve out shelf space in the highly competitive U.S. market. "But not YHS," says the analyst. "It didn't understand the market and the resources needed to back up products." Moreover, adds Nomura's Lim, "Chun King did not have the economies of scale and distribution clout that makes a business like that profitable." Thus, one of America's well-known brand names began losing ground and dragging YHS along with it. Last year the parent wrote down Chun King's value -- taking a $25 million charge -- and separated the subsidiary's accounts from the group's. In March, YHS announced the sale of some Chun King assets to Hunt-Wesson of California for $10 million.

In the end, the U.S. fiasco brought down more than the bottom line: the Yeos splintered. Alan's nephew Charles never understood the Chun King takeover. When it soured, Charles tried to oust his uncle as chairman last year. Alan in turn dissolved the family holding company last July, fragmenting the Yeos' controlling stake in YHS. Then he brought the Ngs in. But Alan's allies sided with Charles instead and, with the Yeo stake split, ruled YHS.

Last October, Chng Hee Kok replaced Alan Yeo as chief executive -- YHS's first non-Yeo CEO. In January, Yeo retired and the company named Wong Yip Yan, head of the innovative WyWy group, as interim chairman (see story, page 45). He and Chng slashed costs, retreated from YHS's ambitious global thrust and restored its successful Asian strategy. Taking over as chairman last month, Robert Ng praised his predecessor: "Mr. Y.Y. Wong has done an immense job in guiding and directing the company . . . during its most difficult period of change."

Eleven days later on June 27, barely giving Ng time to adjust his executive chair, Quek announced his takeover bid after months of quiet share buying. Many analysts at the time said Ng Teng Fong, 65, should take Quek's money and run. The real estate mogul bought most of his stake cheap. His rival has been paying as much as S$4.70, well above the S$4 that most brokerage houses feel YHS is worth. Besides its weak earnings, one analyst isn't bowled over by Yeo's China inroads: "The long-term prospects and the vast opportunity offered by that market also carry high costs involved in training, marketing and distribution."

Those who know the Ngs, however, aren't surprised that they have bought more YHS stock instead of selling out. The family isn't one to shy away from a speculative opportunity. That was how they built their property fortune in Singapore, where they own, among other gems, major commercial centers along the Orchard Road tourist belt. In Hong Kong, their Sino Land company has often made headlines paying record sums at government land auctions. And Robert Ng himself speculated heavily in Hang Seng index futures contracts -- losing some $250 million during the 1987 global crash.

With their enlarged stake, the Ngs could exercise a kind of boardroom veto on Quek's plans for YHS -- unless he buys them out. But the Malaysian isn't one to just throw money at a problem. A lawyer by training, Quek is regarded by his senior management team as a visionary, a shrewd corporate player and a tough negotiator. He is nearly evangelical in championing entrepreneurial creativity.

Nomura analyst Lim says the Ngs' property experience may persuade shareholders that "the family would be able to make more money from the factory site [for YHS]. Singapore shareholders may just favor Ng, all things being equal." But Yeo Hiap Seng is still mainly a food and beverage company, and investors would have to consider which billionaire can run that core business better. Lim doesn't think it will be sold. For one thing, Pepsico may not like its franchise going to some unknown third party. Besides, adds Lim, "the drinks part is a good solid business in its own right, which YHS can expand especially if it makes a lot of money on property." With Chun King excised from its results, he expects the group to net profits of $5.7 million this year, $8.4 million next year and over $10 million in 1997.

Does the Ng-Quek tussle herald more bruising takeover battles in the Lion City? In encouraging citizens to invest in stocks, the Singapore government has urged them to think long term. But that hardly seems the strategy that the current bare-knuckles boardroom brawl will promote. Still, in the Yeo Hiap Seng contest, Singapore may find that a takeover war every now and then is a good way to lure investors to its trading halls.


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