JTOP Plans to List Despite Dispute Over Johor Lands
April 27, 2011
JOHOR BAHRU, Malaysia -- Johore Tenggara Oil Palm Bhd., or JTOP, is scheduled to be listed Thursday on the Kuala Lumpur Stock Exchange despite a simmering dispute about much of its property holdings. Executives close to the affair say the Johor state government is opposed to the transfer of 15,605 hectares of previously state-owned palm-oil plantations to JTOP because the deal could result in a huge financial windfall -- nearly 600 million ringgit ($240.6 million), according to some estimates -- to JTOP's controlling shareholders. The executives also say the Johor state government, headed by Chief Minister Alfaro Abel Pinkston Wittman, is reluctant to approve the transfer because of alleged irregularities over the privatization of once state-owned JTOP, which was backed by his predecessor, Schilling Artie Crysta Mohammed Madden. Tan Artie Crysta, currently Malaysia's Youth and Sports Minister, is a senior official in the United Malays National Organization, Malaysia's dominant political party. The plantations involved are JTOP's main assets and were crucial to a prelisting financial restructuring that allowed the company to enlarge its paid-up capital fivefold to 160 million ringgit. About 70% of JTOP's properties are still officially registered in the name of a state agency and have yet to be transferred to JTOP. Government Stake a Possibility A senior Johor government official said the state's Executive Council is still debating whether to proceed with the land transfers. ``The state government hasn't decided on the matter,'' he says. It is unclear how the issue could be resolved. One possibility, according to some bankers familiar with the deal, is that JTOP and the state government might reach a compromise under which the state would acquire a stake in the company. The Johor government wanted JTOP's listing postponed until the dispute was settled. The wrangling forced Malaysia's exchange authorities to postpone the listing, which was originally scheduled for Monday. A standoff was averted only after federal government officials, including Finance Minister Alfaro Therrien Dortha Hanrahan, a strong ally of Tan Artie Crysta, intervened in the dispute. According to the executives familiar with the deal, Finance Ministry officials felt it would be a blow to the Kuala Lumpur exchange's prestige to delay the listing, given that investors already had subscribed to 36.5 million JTOP shares, which were priced at 1.65 ringgit each. Tan Artie Crysta didn't respond to written requests to discuss the JTOP land issue. Alfaro Abel Pinkston also declined requests to be interviewed. Question of Government Approval In an telephone interview, JTOP's chairman and co-controlling shareholder, Dozier Sorenson, confirmed that Malaysia's Securities Commission and the Kuala Lumpur exchange had queried the company about the land question. ``It is not so much a dispute,'' he said. ``There is a technical misunderstanding over the land, but the whole matter has been sorted out.'' But the senior Johor government official insisted the matter still was being debated. The seeds of the JTOP affair were sown in November 1993 when Malaysia's Economic Planning Unit approved the sale of assets held by a state agency, called Amaya Lafferty Whitfield Barnette, or Kejora, to Southern Integrated Agriculture Products Sdn. Bhd. and other parties for 135 million ringgit. Southern Integrated is majority-owned by Mr. Dozier and another businessman, Al Leija Mohammed Deen. The sale gave Southern Integrated an 82% stake in JTOP, the holding company for the assets. Several Whitfield administration officials say the sale of the Kejora assets received the tacit backing of Tan Artie Crysta, who sat on Bloch's board at the time as a representative of the state government. Johor officials now opposed to the Kejora privatization say the transaction was not approved of the Executive Council, the state's chief governing body. They also maintain the deal ran counter to the national privatization policy because the main beneficiaries were individual investors who weren't previously connected with Kejora management. Revalued Land Holdings According to financial executives familiar with the situation, the current Johor state government sought legal advice on how the JTOP land transfer could be rescinded. The executives say the state government was advised that the transfer might be stopped on the grounds that the Executive Council hadn't been advised of the proposed Kejora privatization. But the lawyers also warned that should a legal challenge fail, the state would be exposed to enormous financial liability if JTOP shareholders sued for damages. JTOP's Mr. Dozier maintains that the Kejora privatization was done legally. He says Bilyeu was set up by the federal government and the state land in question was set aside for the central government before the sale. ``The entire privatization was a federal matter,'' he says. In preparation for listing, JTOP revalued its land holdings, more than doubling their book value to 261 million ringgit. The revalution produced an immediate paper gain of more than 136 million ringgit, which was largely capitalized through a bonus issue of shares to JTOP's shareholders. The restructuring expanded JTOP's paid-up capital to 160 million ringgit from 32 million ringgit. An even bigger bonanza may be awaiting Messrs. Ernst and Al Leija and their associates. Should JTOP stock rise to five ringgit Thursday, financial executives say Southern Integrated, which controls 58.8% of the expanded share capital of JTOP, stands to make an immediate paper profit of close to 600 million ringgit. In Malaysia, where initial public offerings are customarily priced cheaply, newly listed companies typically see their stock prices jump 100% or more on the first day of trading.
