Zaw Zaw's Singapore takeover bid hits a snag

Zaw Zaw's Singapore takeover bid hits a snag

Burmese millionaire tycoon Zaw Zaw’s attempt to take over a listed Singaporean company has been blocked as least temporally by stock market regulators citing concerns about his continued presence on the US government’s Burma sanctions list.

According a statement released today by Aussino Group Ltd, a penny stock that describes itself as a bedding retailer, officials with the Singapore Exchange (SGX) raised red flags over the proposed deal and therefore “the Exchange is unable to proceed with the review of the application as major issues have not been adequately resolved”.

If carried out the deal would have seen Aussino buy Max Strategic Investments Pte. Ltd. a Singapore registered holding company which controls Max Myanmar’s chain of 21 gas-stations, by issuing 70 million Singapore dollars (US $57 million) in new shares to the Max Myanmar Group, in what is known in the business world as a reverse take over (RTO). As part of the proposed deal Zaw Zaw would have ended up as the largest shareholder in Aussino.

Zaw Zaw’s RTO of Aussino, essentially a shell company that has run a loss for three straight years would enable Max Myanmar to get a foothold on the Singaporean stock exchange without facing the usual scrutiny that would accompany a normal initial public offering (IPO).

According to a report in the Wall Street Journal last July shortly after Zaw Zaw’s bid was first proposed, the paper stated: “If Mr. Zaw Zaw’s gambit succeeds, it could provide a blueprint for other Myanmar businesses that want to raise more cash to fend off cash-rich foreign companies like PepsiCo Inc. that have expressed interest in expanding here”.

Having access to overseas capital markets would also enable Zaw Zaw to expand his business empire and give the 46-year-old millionaire a degree of international legitimacy he seems to crave. But this may prove difficult, in addition to Zaw Zaw’s continued presence on the US Treasury department’s “Specially Designated Nationals” (SDN) list, Singaporean stock market officials were also troubled by several other controversies surrounding Max Myanmar.

According to the statement issued by Aussino today, Singaporean regulators rejected the bid in part over concerns that Max Myanmar Group of Companies has “been alleged to be involved in (i) human rights violations in connection with forced land acquisition by the former Myanmar government; and (ii) tax investigations by the tax authorities of Myanmar”.

Singaporean regulators were also alarmed that the deal would have involved Aussino putting 65 percent of its cash with the Ayeyarwady Bank even though the bank, which is wholly owned by Zaw Zaw, is also on the US government’s sanctions list, according to the Aussino statement.

Although Aussino had been warned last week by its own consultants Prime Partners Corporate Finance (PPCF) to halt the deal citing concerns expressed by officials with the Singaporean Exchange during a meeting last Wednesday, the firm initially indicated it was going to press ahead with the RTO, according to Singapore’s Business Times newspaper.

“The board’s decision is that the company will not withdraw the application,” said Aussino board chairman Anthony Lim, in statement issued late last week.

In a letter dated yesterday, officials with the Singaporean exchange reportedly rejected the RTO bid. After a halt on trading Aussino shares was lifted Monday morning shares in the firm fell by as much as 58 percent.

Zaw Zaw, whose extensive business interests in Burma include jade, timber, rubber plantations, construction, banking and hotels, is frequently described as one of the country’s richest tycoons. In a special report published last year Reuters estimated that his Max Myanmar Group has annual revenues of US $500 million.

Zaw Zaw became the target of US sanctions because of what the US government described as his close ties with Than Shwe’s military regime. Several US diplomatic cables disclosed by Wikileaks describe Zaw Zaw “as one of Burma’s up-and-coming cronies”.

A November 2007 cable reported that “Zaw Zaw actively seeks favor with the senior generals, and competes with Tay Za for key construction projects by volunteering to do them at a lower cost”.

The manner in which Zaw Zaw obtained the gas stations that are the subject to the Aussino deal and other state assets at rock bottom prices in 2009 and 2010 during a wave of unprecedented privatisation orchestrated by the Than Shwe’s regime remain the subject of immense controversy and accusations of fraud.

Like other regime cronies, most notably Tay Za, Zaw Zaw’s fortunate was amassed thanks to numerous highly suspicious insider deals and quid pro quos. The same 2007 leaked US diplomatic cable reveals that when Zaw Zaw’s firm built the Royal Kumudra Hotel in Naypyitaw he wasn’t paid in cash but instead received 10 lucrative permits to import cars, estimated at US $180,000 each.

Permits for a cement factory and the Ayeyarwady Bank which were doled out by the now defunct military regime proved particularly lucrative for Zaw Zaw, whose frequently photographed sporting a trade mark grin. “For those two [the cement and bank permit], I really appreciate it. I want to say ‘thank you’ to the previous government,” Zaw Zaw admitted during an interview with Reuters last year.

Zaw Zaw, who also serves as the head of the Myanmar Football Federation, which receives financial support from world soccer body FIFA, has immersed himself as of late in humanitarian activities in an apparent attempt to clean up his image. This includes a controversial donation made last year to an education project operated by the National League for Democracy.

In an interview with the Irrawaddy published last week Zaw Zaw described himself as an honest businessman who had “become a political victim and been called strange names”.

“I am Burmese and a native of this country. I have never betrayed my country. I love it and want it to be honored. I do business and pay taxes. At the same time, I take care of my staff as I would my children and carry out CSR [corporate social responsibility] for them”, Zaw Zaw said.

Other leading Burmese businessmen have had more success with Singaporean regulators. Yoma Strategic Holdings, a firm owned by property developer Serge Pun has been listed on the Singapore exchange since August 2006.

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