Green Packet S Bumi Deception To Takeover Silterra

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Ali Baba's company of Ali front but Baba behind?
Prime Minister, Tan Sri Muhyiddin Yassin managed to pass through two major hurdles and his premiership seemed secured for the time being. Since the budget has sailed through, Board of Directors of Khazanah Nasional should be politically secured to meet and deliberate on the Silterra sales pending for the approval of Khazanah Nasional’s Board of Directors.
Failing which, it means the political move to oust Muhyiddin is not over. Any sensitive member of the Board knows a wrong decision could terminate their corporate career. If there is any wrongdoing, they could be subjected to latter day investigation.

The budget presentation to parliament, the ensuing debate and its’s passing last Thrsday took up the media attention for the last two weeks as it may have placed Muhyiddin’s government in quite a predicament. Now that it is over, for the time being at least, it is timely to relook at the Silterra sales issue again.

The talk of selling Silterra to foreigners have not been taken well by netizens. [Read portal MyKMU, blog Captain M, and TV Online.]  Dato Najib touched on the Silterra sale in his FB too. 
If their demand to allow for EPF withdrawal to tide their financial constraint is any indication, Khazanah may need to take heed of their concern.

Dnex versus Green Packet

The local bidder would be between Dnex vs Green Packet.

Dnex was the local owned company invited to plan for Silterra turnaround. The decision to invite them may have arised from their past success as a Bumiputera company that successfully tookover Dagang Net subsidiary out of Time Engineering Berhad hand, then held by Khazanah.

Dnex was invited to plan for the takeover and turnaround of Siltera since three years ago. 
After much effort made, millions spent, and the benefit of knowledge from the technical and financial proposal plan of Dnex, the conveniently, unprofessional and unethical Khazanah management decided to change the goalpost to invite other bidders.

This severely put Dnex at a serious disadvantage as its plan and numbers would likely have leaked. It is easier for competitors to have the benchmark to up the numbers and better the terms.

If Dnex had not improve on their submission, their plan remain the more serious plan by a local to develop an ecosystem that will benefit the local semiconductor industry and help it grow from the current industry segment it is working within efficiently and without wasteful resources employed.

Dnex’s Bumiputera shareholders, management and staff is an attractive criteria and advantage in view of the intended emphasis in Muhyiddin’s budget to return back to revive the Bumiputera economy.

Bumiputera deception


It may have been anticipated by Green packet that they launched and promoted their BumiTech Fund initiative with a Singapore-based Private Equity firm, GP Kendall Equity Capital. [The Star news report dated November 12, 2020 is reproduced below as Appendix].

Green Packet is a partner and contributed RM100 million in the RM500 million Fund, which claimed is meant to “support the growth of bumiputra-run, late stage high-tech companies” and “value-accretive” or in other word, their presence could enable the company to go IPO.

BumiTech Fund, is not a Bumiputera fund, but participating in potential Bumiputera company as “substantial minority stakes with strong minority shareholder rights including board representation”.

It means the deceptively named Fund could control the Bumiputera company till it could exit or if is financially profitable to take majority control of the company at a latter day when it is convenient. 
Also, the investee company is basically a transitory Ali Baba company of an Ali Bumiputera facade with a "Baba Nyonya" at the back controlling the wheels. .

Green Packet's reviewed proposal to Khazanah Nasional is believed to include Khazanah and another government entity will have a significant minority presence. Together with BumiTech Fund, which is obviously not Bumiputera, the combined equity could give the elusion the majority ownership are Bumiputera.

However, Khazanah or the government entity are not Bumiputera company but government owned entities. The PH experience proves government companies could foresake Bumiputera agenda upon change of government. 
If government as represented by Khazanah’s BOD agrees to this structure, it is a betrayal to the Muhyiddin’s own policy and the so-called Shared Prosperity initiative.

Political warchest?

Green Packet’s questionable past dealing with one of Khazanah company, namely Telekom Malaysia has been raised and it was reported by media to be investigated by MACC. Kendal Capital was involved with Green Packet prior to the questionable Packet One sales to Telekom. 
Once lost to Green Packet, Silterra will lose the social agenda attached to it and come exit time, the lesser the bother. . 

Under Pakatan Harapan, government undertook a massive sales of asset in which the the prevailing suspicion then was that there were massive kickback for the then ruling parties to build up their political war chest. 
Any government asset sales these days are conveniently made at deep discount and in a hurry making the sales looking dubious and attract such suspicion.

Green Packet is involved in a bid and their bid are supposed to be confidential. It should not be disclosed to the public, but yet they are aggressively churning news on mainstream media (Star and Sundaily) and several financial and techie media - Stockbit, Digital News Asia and FinTech News. 
Such exuberance to compromise ethics does raise eyebrows as to why Khazanah does not care. The manner Khazanah change goalpost on Dnex too raise eyerbrows, .  

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Appendix:

Star Exclusive - Bumi tech firm potential unleashed


By ROYCE TAN

CORPORATE NEWS

Thursday, 12 Nov 2020

PETALING JAYA: Taking the road less travelled, an upcoming private equity (PE) fund is aiming to support the growth of bumiputra-run, late stage high-tech companies in what seems to be untapped investment opportunities.

Plans were underway for Green Packet Bhd to roll out a RM500mil BumiTech Fund through a general partner setup with Singapore-based PE firm Kendall Court, which will be known as GP Kendall Capital Partners.

Green Packet executive director Tan Kay Yen (pic below) said the fund would be looking primarily at bumiputra companies because of the abundant opportunities


“It’s in the bumiputra space where we feel that there’s an opportunity for public private collaboration.

“This is where we come in in terms of funding support, fostering joint ventures (JVs) and consortiums and then providing the company with the technical know-hows and capital, ” he told StarBiz.

It seemed timely after the Presidential election in the United States, as the world heads towards the decoupling of the United States and China.

A Joe Biden administration would not defuse the ongoing trade tension between the two countries and experts across the globe believed that the rivalry of the two economic giants may intensify as far as technology is concerned.

The only consolation is, Biden is expected to be less confrontational than Donald Trump, who waged the economic war with China in 2018.

With this plot setting the economic tone over the medium to longer term, South-East Asia and Malaysia are expected to continue benefiting from the unabating conflict which will see more companies diversifying their locations.

Tan said the objective of the BumiTech Fund was to push the companies to upscale, expand their local and global networks and eventually export their technology product and services, which will be vital in line with the exponential growth of IR4.0



Among the benefits for the bumiputra entrepreneurs would be the upgrading of skill sets, employment opportunities for high-skilled jobs, improving productivity and profitability and to venture into overseas markets. Data from CB Insights showed that investment into the technology space has grown three-fold from 2013 to 2019 and is expected to grow by another three fold between 2020 and 2025.

Most of the investments, around 54%, come in at the seed or angel funding stage and as it moves down towards series C, D and E+, the investments start to taper off.

This is understandable as investors would want to hop on the early ride and when it burns, it would not be that severe.

“They don’t burn off so much money because the early stages don’t require large volumes of investment.

“And this is where we saw an opportunity and why the fund is tailored to focus on the late stage, ” he said.

Tan said the late stage companies could either be small listed companies or unlisted companies, because the number of listed bumiputra companies against the total listed companies was not balanced.

This presented opportunities to bring the private companies to an initial public offering (IPO).

For context, 212 out of 959 listed companies in Malaysia are tech-based companies while 203,593 or 15% of non-listed companies play in the tech space.

Out of the 212 listed companies, only 18.5% are bumiputra-controlled.

“They are profitable but they are not at the size that you can go for IPOs or their market is only local. There’s no regional story.

“There is still a lot of growth in the late-stage companies. It’s not that they don’t have the ability, it’s the complacency, ” Tan explained.

Being a limited partner, Green Packet is committing up to 20% or RM100mil to the BumiTech fund, the first of many funds under the general partner setup.

The fund is also soliciting commitments from a select group of public and private sector investors who have strategic or commercial interest in Malaysia’s technology segment and those who are geared to capitalise on the “early mover advantage” to capture attractive opportunities.

Other limited partners have also voiced their commitments to park money into the fund, such as the Chinese PE fund Orient Excellent, state-owned central financial enterprise China Orient Asset Management and electronic conglomerates Konka and Huaqiang Group.

The BumiTech fund is looking at around eight to 10 investments at RM50mil to RM80mil each.

In ensuring optimal diversification of the fund’s portfolio, Tan said investments for single projects would be no larger than 20% of the fund size, a maximum of 25% for a particular sector and not more than 25% for overseas business, to ensure that the investments remain Malaysia-focused.

“Why so? Because we want to bring these guys overseas, that’s one of the agenda.

“Green Packet, being a tech company, concentrate on certain areas but we have the opportunities from overseas technology partners that want us to utilise their technology for the Malaysian market or regional expansions.

“We have all these partnerships that we can bring to the investee companies ourselves, ” said Tan.

The BumiTech Fund will primarily invest in substantial minority stakes with strong minority shareholder rights including board representation.

It may also selectively consider acquiring majority stakes in partnership with experienced operators or management teams.

It will also generally invest in the capacity of a value-accretive strategic investor wherein it can provide pro-active assistance towards business development, operational know-hows, effective management and sound governance of its investee companies.

Tan planned to have the first close of the entire fund towards the first quarter of 2021 and the company is also doing due diligence on a few companies that the fund has set its eyes on.

One of its first major investments would be in chipmaker Silterra, should Green Packet be successful in acquiring it from Khazanah Nasional Bhd.

StarBiz had reported that Green Packet had updated its binding offer of US$62.5mil for the company, assuming the equity conditions were retained and US$81.2mil in an alternative binding offer, if the equity conditions were removed.

The portion of Green Packet’s investment will come from the BumiTech Fund.

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