Saturday, December 01, 2007

Synergy Drive Merger: Winners and Likely Losers

A Kadir Jasin

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MANY debaters have asked me to comment on the completion of the merger of three Permodalan Nasional Berhad’s plantation-based companies – Sime Darby Berhad, Golden Hope Berhad and Kumpulan Guthrie Berhad .

I had commented on the subject many times before in this blog as well as in my Other Thots column in the Malaysian Business magazine.

With your indulgence, I would like to post my latest comment on the subject, which appeared in the Oct. 16 issue of the Malaysian Business.

I wrote:

THE rejuvenation of Tun Musa Hitam, one of the two surviving Deputy Prime Ministers of the Tun Dr Mahathir Mohamad era, continues and appears to be unstoppable.

He is seen not only as a close buddy of the Prime Minister but also enjoys his confidence.

He was not only bestowed with the nation's highest honorific title –Tun - but has also been entrusted with many important governmental responsibilities, one of which is as unofficial adviser to the Prime Minister.

This is only to be expected. Abdullah and Musa ware in the same faction of the luckless `Team B' that unsuccessfully tried to topple Dr Mahathir as Umno President and Prime Minister in 1987. The other faction was led by the former Finance Minister Tengku Razaleigh Hamzah.

Musa is a shrewd politician and is considered by many politicalcommentators as a master of intrigue and one who sees himself as the ultimate Malay liberal.

His position as an elder in the Prime Minister's inner circle became even more important following the challenge to Abdullah by Dr Mahathir and Tengku Razaleigh. Abdullah counts on Musa toprovide him with a political shield (against Dr Mahathir).

This has led to Musa famously describing Abdullah's refusal to answer Dr Mahathir's charges as an `elegant silence'. Those who know Musa are not surprised by such tokenism.

For his support and loyalty, he has been amply rewarded with honour and respect - the latest being his appointment as the chairman of Synergy Drive Sdn Bhd.

If we are to believe the media and market hype, Synergy Drive is the company and the way of the future.

It was born out of the mega merger of three Permodalan Nasional Bhd (PNB) plantation companies, namely, Sime Darby Bhd, Golden Hope Plantations Bhd and Kumpulan Guthrie Bhd.

PNB's chairman, Tan Sri Ahmad Sarji Abdul Hamid, was named deputy chairman. The national investment company remains the controlling shareholder of the plantation behemoth.

To my mind, Musa's primary task is to ensure that the success of putting together the historic merger is followed by an equally successful amalgamation and consolidation at the operational level with minimum dislocation of resources, in particular, the group's rich human capital - to borrow the Prime Minister's buzzword.

The fear that the merger could lead to widespread retrenchment is not unfounded. Many government-linked companies have, in recent years, resorted to retrenchment to save cost and show rising profits.

Apart from amassing and investing Bumiputera capital, PNB has been a fertile ground for the employment and training of Bumiputera managers.

Its plantation companies, which employ 107,000-odd employees, have trained and employed some of the best and most capable Bumiputera managers, planters and researchers.

Musa cannot count himself as being successful if this human capital (modal insan to borrow the Prime Minister's jargon) is sacrificed in the name of profitability and market capitalisation.

In many ways, Musa is equipped to do the job. He has a long association with commodities, being the country's first Primary Industries Minister back in the 1970s.

If there is anything that we can describe as Musa's legacy, it has to be his handling of the 1970s' rubber crisis. Musa was tasked with finding solutions to the crisis, which, among other things, led to the 1974 Baling protest.

It can be recalled that Anwar was among the ringleaders. He was arrested and later detained under the Internal Security Act for 22 months.

Musa was instrumental in recommending a system of price support for the commodity and later a national stockpile to mop up excess rubber produced by the smallholders.

Apart from Ahmad Sarji, Musa will be assisted by a strong multinational board comprising Indonesian banker Dr Arifin Siregar, prominent planter Datuk Henry Sackville Barlow, Islamic banking expert Datuk Dr Halim Ismail, Datin Paduka Zaitoon Datuk Othman of the Muslim Lawyers Association of Malaysia and Datuk Seri Andrew Sheng, a former chairman ofthe Hong Kong Securities and Futures Commission.

How he helps guide Synergy Drive, which will soon assume the name Sime Darby Bhd, will determine whether he still has what it takes to be a leader, or whether he has lost his leadership ability over the years.”

Footnotes: My additional thoughts and observations on the subject:

1. Was it really a merger or was it a reversed takeover of Golden Hope and Kumpulan Guthrie by Sime Darby? We were told that this was a merger of equals. It’s now obvious that it was called a merger “to enable PNB to vote at the EGM. If it was called a takeover, it would be deemed to be a related party transaction and PNB would have to abstain from voting;

2. A takeover was evident when the new merged entity is called Sime Darby (SD) Berhad. Synergy Drive (SD) was it’s temporary name during the “takeover” exercise;

3. Did the promise to create the world’s largest listed oil palm plantation company really happen? Can the “new” Sime Darby be called a plantation company when only 47 per cent of revenue is contributed by plantation activities?;

4. Have the stakeholders, in particular the PNB, been “taken for a ride” with the promise to establish the world’s largest listed oil palm plantation but ended up still with a diversified company?;

5. Will another clever and well-connected “orang tengah” (middleman) copy the hugely profitable CIMB’s money making scheme to propose another round of reorganization of Sime Darby so that more commissions and quick capital gains could be made?;

6. Who would be the lucky buyers of Sime Darby’s non-plantation assets should a further break-up of this PNB-controlled company be mandated by the power-that-be?;

7. The initial market reaction to the takeover has been positive. When listed on Nov. 30, Sime Darby shares rose 23.6 per cent or RM2.10 to RM11. But will the long-term assessment change now that the promise to create a truly gigantic plantation company has not materialized?;

8. Will other PNB assets be acquired by other “orang tengah” -- middlemen-- to force another mega merger or takeover on the pretext of business rationalization and economies of scale when the real reason is fee income and quick capital gains?;

9. It is incumbent upon the PNB, in particular its chairman Tan Sri Ahmad Sarji, to guarantee that PNB and its millions of unit trust investors are not taken for a ride;

10. For its shrewd “orang tengah” role, Synergy Drive (CIMB) is believed to have turned its modest invest in the venture (or adventure) into fee income and shares worth hundreds of millions of Ringgit. Not bad for a year’s work;

11. Who is the mystery “non-Bumiputera” market maker who is said to have been responsible for successfully selling this merger idea to the Umno-led government?;

12. Will more Bumiputera assets held in custody by PNB and other Bumiputera trust agencies be “surreptitiously tranferred” to government-linked companies (GLCs)?;

13. In recent years, Bumiputera objectives of trust agencies and companies have given way to profits and market capitalization at most GLCs;

14. What will happen to the staff on the enlarged Sime Darby in the long run? When the sale of business agreement was signed, everyone was promised at least one year of guaranteed employment. When job offers were made, they were offered one year to three years “contracts”; and
What about morale? There have been allegations that those putting together the takeover “have no respect for seniority ” and that the staff of the “dead” Holden Hope and Kumpulan Guthrie alienated.


A Voice said...

Refering to your question below:

"1. Was it really a merger or was it a reversed takeover of Golden Hope and Kumpulan Guthrie by Sime Darby? We were told that this was a merger of equals. It’s now obvious that it was called a merger “to enable PNB to vote at the EGM. If it was called a takeover, it would be deemed to be a related party transaction and PNB would have to abstain from voting;"

This was the same concept used to enable the Avenue EGM to allow the merger (actually takeover by) with ECM Libra).

In the Avenue case it is worse, there are sufficient ground to claim that the major shareholders are working in concert. It was a clear case of strong arming the regulator to comply and advisers colloborated.

Pak Lah turun nanti, kita go after him ... Tak lama lagi dah.

Anonymous said...

Very insightful questions in the footnote. I suspect those who mooted the idea of this "merger" would rather avoid answering them for obvious reasons. I also got the feeling that this is a roundabout way of "slaughtering" the bumiputras' interest in the not-too-long run by another clever Oxbridge "stategic merger" idea disguised as a "world-class plantation behemoth" with PPB-linked "comrades" across the causeway? Who knows?

Unknown said...

YBhg Datuk,

Restoring staff morale will be an uphill task for the management of the "new" Sime Darby Berhad. As you rightly put it, when the SBA was first signed, staff were promised at least a year of employment after the TAKEOVER (I say, "takeover" because it is certainly not a "merger of equals"). But what the staff did not know was that they were about to be demoted and their job securities taken away.

People who were holding positions of Directors at Golden Hope and Guthrie, were demoted to mere managers. Permanent senior management staff were given contracts, some only for a year.

Staff from Sime Darby were given high positions in the pretext that they did better in a Leadership Mapping" exercise. The exercise lasted a few hours. Are we saying that the compatibility of a senior staff in an organisation, his competencies, his experience can be determined by written "exam-like" exercise which lasted only a few hours?

For the record, the results of the Leadership Mapping exercise, undertaken by Human Resource Consultant, Hewitt and Associates "WAS NEVER MADE AVAILABLE TO ALL THOSE WHO WENT THROUGH IT". Apparently a few heads of department shared it with their staff, but not all.

The reason the results of the exercise was never revealed is simple: HEWITT AND SIME DARBY CAN BE CHALLENGED!

The questions asked at the Leadership Mapping Exercise were all about company acquisitions. Is it fair to ask a planter questions on how to go about acquiring companies?

If the CEO of Sime Darby Dato' Seri Ahmad Zubir Murshid was asked to take a similar exam and asked questions about how focal feeding and water management are carried out at the estates, will he be able to answer them?

If the argument was that all senior staff should know something about company acquisitions, finances, etc, shouldn't Ahmad Zubir also know something about focal feeding, water management, weeding, beneficiary plants, pest management, etc?

The truth is the leadership management exercise was skewed in such a way to suit Sime Darby.

The unfair treatment of Golden Hope and Guthrie staff is very evident.

While all Sime Darby staff who were made Heads of Division, were given the ranks of Executive Vice President, the Golden Hope director of Finance was made a mere Group Director of Finance.

The truth is the exercise made pariahs of Golden Hope and Guthrie staff.

To be continued....

Anonymous said...


I am too naive to understand why the majority sidelined 'pariah' can't do anything to stop the crime.
A few honorable melayus are up there. Can't there do something? Musa is an exception since his credibility and integrity has gone down the drain.
Is that too easy to buy Melayus nowadays?

If so, I am speechless.

H J Angus said...

In such makeovers it is guaranteed that there will be a reduction of staff, I expect about 20 to 25% at the HQ level and that would be about 2000 staff jobs from the 3 plantation companies.

An easy minimum RM20m savings in staff and related costs.

The intention to create a larger company is suspect. PNB just appointed a third party to do what it could not stomach.

In a way, this reorgan. of such major companies is going against the NEP when so many staff will be made redundant. Not only that the work for the makeover becomes very profitable for a few connected people.

Anonymous said...

DULU: TH Plantations listing
KINI: Sinergy morph
AKAN: TM/Celcom split

More if all are "elagantly susila" ...

Anonymous said...

Dato' saya kurang faham bahasa inggeris apalah lagi isu ekonomi dan bisnis. Tetapa dari apa sedikit yang saya faham, saya rasa PNB telah gagal pertahan haknya yakni hak Bumiputra dan hak pelabur ASB, ASN dan sebagainya.

Saya nak tanya apa yang Ahmad Sarja dan Kama Piah buat bila serangan ini dibuat ke atas Sime Darby, Golden Hope dan Guthrie?

Saya bimbang dengan pertanyaan Dato' yakni syarikat pemegang amanah Bumiputra macam PNB, Felda dan Tabung Haji makin hari makin diancam dijadikan GLC yang bukan milik Bumiputra lagi tapi semua rakyat Malaysia.

Saya hairan macam mana pada masa hak dan keistimewaan orang Melayu sekamin dicabar dan orang Melayu semakin dihina, Perdana Menteri sangat ghairah dengan bisnis sehingga hak ekonomi orang Melayu yang sikit itu semakin berkurangan kerana Pak Lah terlalu taasub dengan duit dan keuntungan. Saya curiga PM kita ini fahamkah isu ekonomi dan perniagaan? Kalau dia tidak faham, bahayalah kita orang Bumiputra.

Najib dia faham tapi apa fasal dia diam dan sokong semua projek dan dasar yang merugikan Bumiputra. Saya takut bila sampai masa dia memerintah, orang Melayu sudah jahanam semuanya. Sekarang pun orang Melayu sudah lebih daif dari orang India yang sedang membuat macam-macam tuduhan dan tuntutan yang memalukan kerajaan pimpinan orang Melayu. Saya takut dan malu jadi orang Melayu bawah Pak Lah. Dulu kita Melayu Boleh. Sekarang kita orang Melayu letih.

Anonymous said...

Let's be frank, business is not about protecting the rights of the Melayu or to enhance the business skill of the Bumiputeras. Whoever still believing that the merger is meant for "menperkasakan" or "mengangkasakan" the Bumiputeras in this country is still living in the dreamland.

Business merger is about what's in it for me. And if it involves few parties, it is about how much share of profits each party will get at the end of the day. It is not exactly for the welfare of the staff and executives, it is about how much assets and money can I plunder.

Forget about shouting for rights and interest of the community and shareholders. It is about making money and for the broker, it is about the obscene fees as Dato' mentioned, running into hundreds of millions RM for a year's work.

Everything what this country is being built for is being dismantled under this administration. What a shame.

Zainal A. Kasim said...


Sekiranya merger ini adalah untuk melahirkan satu entiti yang lebih kuat, saya amat bersetuju. Namun dalam usaha ini, perlu dipastikan pemilikan Bumiputra yang dipegang oleh PNB hendaklah dipertahankan. Begitu juga dengan kuasa eksekutif yang dipegang oleh professional Bumiputra.

Pastikan penguasaan profesional bumiputra terhadap entiti baru ini tidak diabaikan. Saya agak "terganggu" dengan perkembangan di sebuah entiti kewangan Bumiputra selepas aktiviti mergernya apabila sebahagian besar kuasa dipegang oleh orang bukan bumiputra seolah-olah bumiputra tidak mempunyai kemahiran langsung. [entiti kewangan ini terlibat aktif di dalam kelahiran baru sime darby]

Anonymous said...

YBhg Dato'
Saya amat berharap Tun Dr Mahathir dapat memberi sedikit komen tentang perkara ini. Saya percaya ramai yang ternanti-nanti akan komen Tun. Adalah diharapkan Tun dalam keadaan sihat dan dapat menyedarkan rakyat dengan kata-kata yang bernas beliau agar harta warisan bangsa tidak senang-senang digadaikan demi keuntungan segelintir melayu yang rela lihat bangsanya menjadi miskin dan hina, hanya untuk mengkayakan kaum keluarga dan penyokong mereka.

Anonymous said...

I take exception to the phrase:

"Who is the mystery “non-Bumiputera” market maker"

Let's remind ourselves to move away from race-based descriptions when it is not necessary.

Why does it matter whether the market maker is Bumiputers or not in this circumstance?

Perhaps if he is not a Malaysian, you might use non-Malaysia, or foreigner. Beyond that, I thought we were striving for equality for all Malaysians, across race and income levels.

Rockybru said...

A bunch of journalists benefit greatly from the Synergy Drive merger, Datuk Scribe. Former journalists, I mean. They are the people who lead Fox Communications, the "Mother of all PR firms" that started making big splashy waves last year. The company is led by Wong Sulong, the former EIC of the Star and Brenden Pereira, the former Group Editor of NST (note: he is also one of the 4 individuals who, together with NSTP, are suing me for defamation).

Fox is the PR handling the Synergy Drive account. Big account. How they got the job is anybody's guess. We know, however, that these two individuals are close to the people who advise the PM.

Fox has recruited several journalists form the NSTP group. All my friends, so I won't mention them here. They are, after all, cari makan saja.

The biggest loser, in this context, would be the other PR firms, the ones who have been around longer than Fox and who thought they were better than Fox.

It's about pulling the right cables. Who -- not what -- you know.

Anonymous said...

Assalamualaikum Dato',

Saya lebih risaukan apakah saudara-saudara kita dapat mengekalkan their jobs di dalam entiti yang lebih besar ini. Almaklumlah bila berlaku rationalisation akan berlaku percaturan berapa banyak staff nak 'dirasionalisasikan'.

Saya berharap saudara-saudara kita mengambil peluang ini untuk terus memperjuangkan hak untuk terus kekal dalam entiti baru ini. Demotion atau contract employment adalah lumrah dalam exercise sebegini. Sekurang-kurangnya staff masih diberi peluang untuk menunjukkan keupayaan sebelum the grand scale VSS being implemented. Yang penting tunjukkan keupayaan dan jangan mengaku kalah.

Oleh itu, saya berdoa agar saudara-saudara kita diberi ilham bagaimana boleh terus kekal dan masih mempertahankan apa yang sepatutnya milik kita.

Anonymous said...


1.It seems at this moment there is more negative effect than positive one.

2. Don't they apply the basic SWOT analysis before proceeding woth the idea.

3. Why put everything in one basket ? Each of these GLC have their own strength & weakness, but overall they are doing ok, and it's still benefit the shareholder and staff.

A lot of questions in this "merger" and the roles of PNB to improve of the Bumiputera interest in Malaysia economic seem being manipulated by hidden hands.

Anonymous said...

In the first place, it wasnt a merger at all. It was a case of big strong and unfriendly Sime Darby swallowing up the rest under the guise of a merger. How else do you explain the change of names from Synery Drive to Sime a few days before listing on the stock market. It is a sick joke. Anyway, be that as it may, I benefit handsomely from the merger. So I am not really complaining. Any more mergers on the house?

Anonymous said...

Hello Datuk,
Its always a pleasure to read your comments especially for its level headedness and clarity of thinking.
As a malaysian, I really can't see what the fuss is all about - after all if the merger benefits ALL Malaysians regardless of race, then it can only be a good thing.
If efforts such as as this is perceived to be further disenfranchising a particular ethnic community, then surely the issue cannot be blamed at anyone other than the govt and their advisors whose initiatives this almost entirely was.
As a non-Malay, I really can't understand how my so-called fellow Malaysians can complain that this govt over the past few decades have been biased towards the malays.
I would argue that as per normal, the public rhetoric by UMNO has always been "memperjuangkan Nasib Bangsa Melayu" but the results of their policies and the way it has been implemented is inconsistent with their claims.
In fact it could quite easily be argued that the DEB's biggest beneficiaries have been the Chinese. But even if this was true I certainly hope that org melayu will not get angry at the writer for pointing this out. Historically close links forged between major economic interets and political authority in this country has been going on for many decades. And since Chinese businesses have been a major part of that landscape and their relationship to the malay social and political elites have been intimate, surely developments which by an large leaves the Malay public behind can only be the natural consequence of events. Its hilarious when one sees the ways in which the debate surrounding the 'winners' and 'losers' of the DEB was discussed not too many moons ago.
Lets face facts - if non- malays truely benefit from economic developments in the country, its most certainly not our fault. It could boil down to a couple of things -1) that malays are ultimately what they say about themselves (malas, tak pandai buat kerja, budaya lembap etc) or that in practice this govt has much more to gain by maintaining the current economic and social status quo - hey org melayu, bangunlah dan hidulah bunga mawar, apa nak buat hari2 kena tipu bulat2!

Berita dari gunung said...

Bila ada ketua dan pekerja dalam mana-mana setup, sama ada bisnes atau sektor awam, ruang sentiasa diberikan kepada pekerja supaya kreativiti dan komitmen dapat dicernakan sebaik mungkin. Setup itu akan kekal relevan dan berdaya saing.

Apa pun sistem yang digunakan, konsep "planning" dan "monitoring" tidak boleh diabaikan bagi merealisasikan matlamat.

Saya yakin Musa dengan kepercayaan tinggi dari PM, dapat melaksanakan tanggungjawab dengan baik. Pasukan beliau juga terdiri dari mereka-mereka yang berkaliber.

Saya sangat berharap, dalam tindak tanduk mereka, tidak ada usaha ketara untuk memadam aspirasi, nostalgia masyarakat, komitmen, rancangan menyeluruh yang disediakan oleh Tun. Jika itu ada, mereka masih mengekalkan sifat kanak-kanak yang selalu disebut sebagai "bad loser".

Saya percaya synergy drive yang diurus dengan baik akan mengukuhkan ekonomi dan meluaskan potensi Malaysia dalam ekonomi global. Selamat Maju dan Jaya.

Anonymous said...

Dato KJ

ini adalah satu lagi contoh kerakusan sistem ekonomi kapitalis yang mempergunakan peluang dan kesempatan serta pengaruh yang ada untuk mendapat laba dan hanya mementingkan untung yang besar. sepanjang yang saya ingat cadangan 'penggabungan' ini bukannya datang dari sime darby, golden hope mahupun guthrie. ianya datang dari cimb yang mengemukakannya kepada pihak yang yang berpengaruh dan berkuasa. tentunya cadangan itu hanya mengandungi kebaikan-kebaikan mengikut citarasa pihak berkenaan tanpa mengemukakan keburukannya. saya tidak fikir pengurusan ketiga-tiga syarikat ini berupaya mengemukakan bantahan. saya terfikir kenapa tidak dicadangkan pengambilalihan syarikat perladangan diluar pnb. mungkin kerana ianya lebih mudah. bukan lebih mudah tetapi amat mudah. sesuatu yang sudah dalam tangan tetapi berada di beg yang berlainan. cuma hendak diletak dalam satu beg sahaja. sejak dari awal lagi saya sudah terhidu sesuatu.

dalam kenyataan awalnya selepas dilantik pengerusi SD musa hitam menyatakan ia akan meningkatkan keuntungan dan dividen. tidak pula dinyatakan menjaga kepentingan kakitangan dan tanggungjawab sosial. yang pasti cimb akan mengeluarkan berbulan-bulan bonos kepada kakitangan unit yang berkenaan. kakitangan sime darby, ex-golden hope dan ex-guthrie entah dapat entah tidak. sama ada penggabungan ini berjaya atau tidak ianya bukan masalah cimb itu masalah sime darby dan pnb. kalau berjaya akan ada penggabungan lain selepas ini. kalau tidak berjaya akan ada peluang projek baru iaitu penyusunan semula.

Anonymous said...

The advisor , CIMB itself underwent a series of 'merger' exercise. The Sime Darby merger exercise is a mere replication , if you can recall PNB were not even aware of the plan. This is merely a paper shuffling exercise to make money and has no political agenda in it. Along the way some lose their jobs but this as they say is just collateral damage.

About Me

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I was born in 1947 in Kedah. I came from a rice farming family. I have been a journalist since 1969. I am the Editor-in-Chief of magazine publishing company, Berita Publishing Sdn Bhd. I was Group Editor NST Sdn Bhd and Group Editor-in-Chief of NSTP Bhd between 1988 and 2000. I write fortnightly column “Other Thots” in the Malaysian Business magazine, Kunta Kinte Original in Berita Harian and A Kadir Jasin Bercerita in Dewan Masyarakat. Books: Biar Putih Tulang (1998), Other Thots – Opinions & Observations 1992-2001 (2001), The Wings of an Eagle (2003), Mencari Dugalia Huso (2006), Damned That Thots (2006), Blogger (2006), PRU 2008-Rakyat Sahut Cabaran (2008), Komedi & Tragedi-Latest in Contemporary Malaysian Politics (2009) and Membangun Bangsa dengan Pena (2009).