Integrax co-CEO says buyout can clear row

Tuesday November 30, 2010

Integrax co-CEO says buyout can clear row

By SHARIDAN M. ALI
sharidan@thestar.com.my


KUALA LUMPUR: Integrax Bhd co-chief executive officer Harun Halim Rasip says the company's fallout with Taipan Merit Sdn Bhd may be solved if one of them buys the other out of Lumut Maritime Terminal Sdn Bhd (LMT).

Taipan Merit, a Perak state-owned enterprise under Perak Corp Bhd, had recently terminated the shareholders agreement with Integrax for LMT, a port-operating unit of Integrax.

It was set out under the agreement that Integrax had the right to nominate the CEO of LMT to be approved by the LMT board.

The agreement also provides for reserved matters which effectively makes LMT a 50:50 joint venture where both shareholders have to be in agreement although Taipan Merit holds 50% plus one share in LMT.

Integrax found the termination unacceptable and a breach of the agreement. Thus it filed a notification of arbitration and made an offer to buy out Taipan Merit on Nov 10.

Integrax also filed an originating summons to Perak Corp, Taipan Merit and the other Integrax co-CEO, Amin Halim Rasip, amongst others.

We are unable to offer the buy-out now until the arbitration stage and I am willing to pay a lot of money for it. We are also going for the injunction because we want to put somebody independent to run the company, protect our shares in LMT and make sure the money is not being dissipated inappropriately.

If it (Taipan Merit) is professional enough, it should offer to be bought out, he told a press briefing yesterday.

Harun said the problem with Taipan Merit started before the Vale International SA contract came into the picture. Harun and Amin, both major shareholders of Integrax, have been feuding over the matter with the latter and Taipan Merit in favour of the tie-up with Vale.

But the problem with Taipan Merit has some impact on the Vale matter. Now, as the transhipment services agreement with Vale had lapsed on Oct 19, we're just going to step back, Harun said.

All the noise for the Vale contract has no merit as it has problems to reflect stable financial return. Also, we do not want to be investing RM250mil to RM300mil while the relationship with our partner is on the rocks.

Harun added that the Vale contract required high capital expenditure where the minimum annual throughput from the project would not generate enough income to meet Integrax's minimum project hurdle rate of return.

It will result in asset yield destruction, he said.

The port signed an agreement with Vale on Dec 29, 2009 which allowed Integrax to expand existing facilities at the Lekir Bulk Terminal (LBT), one of two terminals in which Integrax has stakes in, to comply with the LBT's requirements over a 10-year period.

Meanwhile, Vale bought 166ha for almost RM102mil in cash from KYM Holdings Bhd and its 54%-owned subsidiary, Harta Makmur Sdn Bhd, in early January with an option to acquire an additional 306ha for RM93.8mil in cash.

Going forward, Harun said Integrax would be tapping into Indonesia's booming economy to expand its port operations. Integrax holds a 70% stake in PT Indoexchange Tbk, a public-listed Indonesian company.

Indonesia's vast economic potential is hampered by poor infrastructure, including ports. And supported by hastening of de-regulation process in the port industry, Integrax is ready to fill this gap and has committed to the state-owned enterprise to undertake the operations and management of an established port in Sumatra, amongst other potential projects there.

It is estimated that the expansion plan in Indonesia will cost about US$150mil, he said.

As for LMT and LBT, Harun said negotiations were under way to deal with additional coal-handling needs which would serve the expansion of Tenaga Nasional Bhd's Janamanjung power plant at LBT.

Meanwhile, Perak Corp, in a filing with Bursa Malaysia yesterday, said Taipan Merit had, on Nov 26, acquired 20 million ordinary shares of RM1 each in Integrax, representing 6.65% of the issued and paid-up capital of Integrax, for about RM30.05mil cash.

In a separate filing, Integrax said PT Indoexchange had announced to Bursa Efek Indonesia and had made the obligatory disclosure that it had received a notice of termination of share-sale agreement dated June 13, 2008 from one of three vendors of shares in PT Alkatara.

PT Indoexchange is taking the necessary legal actions against the vendors.

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