In the June 8 issue of The Edge, we detailed how Low Taek Jho or Jho Low surreptitiously used US$260 million of 1 Malaysia Development Bhd’s (1MDB) cash to mount a takeover of UBG Bhd in 2010.
We provided evidence of complicity between Jho Low, 1MDB executives (Nik Faisal Ariff Kamil and Casey Tang) and PetroSaudi International executives (Tarek Obaid and Patrick Mahony) to get 1MDB to take up an additional US$500 million of Murabahah notes from PetroSaudi.
We also showed how US$260 million was then channelled to Tarek Obaid and then to Javace Sdn Bhd, which is owned by PetroSaudi Seychelles (a bearer share company controlled by Jho Low) , to make a general offer for UBG for RM1.4 billion.
The US$260 million was the cash that Jho Low needed to help him exit from the series of complex transactions involving UBG Bhd, Putrajaya Perdana Bhd (PPB) and Loh & Loh Corp Bhd (LLCB) that he started in 2007. (Javace also borrowed RM700 million from AmBank (M) Bhd and OCBC Bank (M) Bhd for the GO).
When he finally exited, Jho Low made RM516 million.
Here is how he did it.
In 2006, Jho Low lobbied Khazanah Nasional Bhd to sell its stake in RHB Bank Bhd to Kuwait Finance House to enable KFH to take over the bank, which was put up for sale by UBG Bhd — a company owned by the family of the then Sarawak chief minister Tan Sri Taib Mahmud.
But the KFH bid failed, and UBG and Khazanah eventually sold RHB Bank to the Employees Provident Fund.
The disappointment that came with not being able to swing RHB Bank to KFH, however, did not stop Jho Low from turning failure into an opportunity.
With UBG sitting on RM2.23 billion after the sale of RHB Bank, Jho Low eyed the cash and moved quickly to connect with Taib.
Sources say Jho Low promised that in return for allowing him to buy a substantial stake in UBG, he would help bring in powerful investors from the Middle-East to help drive what was then Taib’s pet project — SCORE, or Sarawak Corridor of Renewable Energy — which needed billions in investment.
Jho Low arranged for Taib to meet his friends and business associates linked to the governments of various Middle East countries, and Taib was impressed, thinking that these would be government-to-government initiatives when they were not. (See accompanying article: “Jho Low uses bearer share firms and those with sovereign names to mislead”)
On Aug 8, 2007, Jho Low acquired a 49.3% stake in PPB via Swan Symphony Sdn Bhd for RM199 million.
One month later, on Nov 9, he acquired a 45.6% stake in LLCB via Binary Bestari Sdn Bhd for RM111.5 million.
Swan Symphony and Binary Bestari were owned by Abu Dhabi Kuwait Malaysia Investment Corp (ADKMIC), a British Virgin Islands-registered investment holding company.
Jho Low controlled ADKMIC and his cost of investment in PPB and LLCB came up to RM310.5 million.
On Jan 31, 2008, Jho Low flipped his stake in PPB to UBG for RM332.7 million, pocketing a cool RM133.78 million in profit. He also sold down 8% of his stake in Loh & Loh Corp to a third party on the same day, raising RM19.6 million.
On July 25, 2008, Jho Low closed out his position in Loh & Loh Corp by disposing of it for RM123.9 million to UBG.
Ultimately, these series of transactions yielded him a tidy profit of RM165.7 million.
His wheeling and dealing did not end there.
While all the above was taking place, Jho Low was actively acquiring UBG shares using another ADKMIC vehicle, Majestic Masterpiece Sdn Bhd.
On Feb 11, 2008, Jho Low via Majestic Masterpiece acquired 45.4 million shares in UBG at RM2.50 per share for a total of RM113.6 million from several investors.
A few months later on Aug 4, 2008, he acquired a further 182.6 million shares in UBG at RM2.50 per share via a restricted share issuance.
Soon after, he launched a GO for UBG via Majestic Masterpiece on Aug 8, 2008, at RM2.50 per share.
The GO ultimately failed.
But by the offer acceptance closing date on Sep 10, 2008, Jho Low managed to acquire an additional 36.9 million shares for RM92.1 million from minority shareholders.
A few weeks later on Sept 30, 2008, he then disposed of 1.63 million shares at RM2.50 per share, raising RM4.08 million in the process.
At this point, Jho Low’s total cost of investment (after subtracting the 1.63 million shares disposed) through Majestic Masterpiece in UBG amounted to RM658.2 million.
Now, all he had to do was to cash himself out.
On Sept 29, 2010, Jho Low used PetroSaudi Seychelles/Javace to make a GO for all UBG shares for RM1.4 billion with the US$260 million cash and a RM700 million loan from AmBank and OCBC Bank.
In the process, PetroSaudi Seychelles/Javace took out ADKMIC/Jho Low by acquiring Majestic Masterpiece’s entire 52.5% stake in UBG for RM658.3 million or RM2.50 per share. This means that Jho Low broke even after this drawn-out exercise of flipping UBG to PetroSaudi Seychelles/Javace as his cost was RM658.2 million
So, why go through all the trouble only to break even?
Well, he did not break even.
As we explained above, he made RM165.7 million from Transactions 2.
He made another RM350 million by flipping a piece of land in Medini, Iskandar, into UBG. UBG’s cash was used to acquire the land that Jho Low had an option to buy.
To do so, he got UBG to invest RM350 million with Unity Capital Partners (Cayman) Ltd, which was an asset management company that UBG had just bought for a small sum of money when Jho Low was already in control. Unity Capital was managed by fund manager Ian Tham.
Using the RM350 million, Unity Capital then bought out Jho Low’s option in the Medini land, netting him US$100 million (RM350 million) in profit.
This use of UBG’s money upset Taib. To placate the powerful politician, Jho Low then did the GO for UBG that enabled Taib to cash out for around RM465 million.
While UBG subsequently wrote off that investment with Unity Capital from its books, Jho Low walked away with a cool RM515.7 million from his three-year interlude with UBG.