VINCENT TAN GOES AGAINST THE TIDE: ‘OPPORTUNIST’ BILLIONAIRE TO EXPAND HIS AUTOMOTIVE BUSINESSES

THE automotive assembly business is a challenging field in Malaysia. This segment of the automtive industry is saddled with over-capacity issues to the extent that not many would want to put their money in assembly plants.

But Berjaya group founder Tan Sri Vincent Tan is going against the tide. He is close to completing the takeover of Oriental Assemblers Sdn Bhd, a Johor-based manufacturer and distributor of auto parts and equipment, from the Oriental Group. The acquisition is done through Berjaya Assets Bhd, a company that is majority owned by Tan himself and not part of the Berjaya Group.

Only a few have managed to thrive in the automotive assembly business – and Berjaya Group founder seems to be one of them.

Suffice to say, the tycoon – who worked as a car salesman and insurance agent in the 1970s before securing a McDonald’s franchise that propelled him onto a path of fortune in the 1980s – knows how to play the game well.

From acquiring the right business model to getting the right person into his team to drive the business and implement an effective branding and marketing strategy, Tan has managed to see his car business move in the fast lane of growth.

A case in point is the turnaround of the Hyundai brand in the Malaysian market in the mid-2000s before the profitable business was sold to Sime Darby Bhd for a huge gain.

And more recently, is the revival of the Mazda brand in Malaysia under Bermaz Auto Bhd (formerly know as Berjaya Auto Bhd).

Industry observers will be quick to acknowledge that both achievements were the result of Tan being able to identify and incentivise key people who are able to drive the business.

In both instances, Datuk Seri Ben Yeoh, who is now the chief executive officer of Bermaz, had played a key role in turning around businesses and delivering where others could not.

And it all happened because of Tan’s foresight of seeing investment that have potential.

“The bottom line is, Tan is willing to put in the money to build up the business, and he knows how to invest in it to make it work,” a corporate banker says.

In Tan’s own words, he is “opportunistic” when it comes to investments.

He tells StarBizWeek in a recent interview that he believes in being entrepreneurial, and yet cautious at the same time.

While that sounds paradoxical, it has been the approach he has taken in building his business empire that comprises gaming, telecommunication services, restaurants, hotels, consumer products, automotive, real estate and hotels, among others, under his flagship Berjaya group of companies.

Car venture

In the automotive business, Tan has controlling interests in UK-based luxury car dealer HR Owen plc, which provides sales and after-sales services for Aston Martin, Audi, BMW/MINI, Bentley, Bugatti, Ferrari, Lamborghini, Lotus, Maserati, Pagani and Rolls-Royce.

Through Berjaya Philippines Inc, an 88.26%-owned subsidiary of Berjaya Sports Toto Bhd (Btoto), the group is in the process of raising its holdings in HR Owen Plc from 72.07% to 98.38%.

Tan is also involved in the marketing and distributorship of Chinese commercial automotive marques such as Jinbei, Changan, Dongfeng Sokon and Foton Motor Group in Malaysia through Berjaya China Motor Sdn Bhd, in which Berjaya Corp Bhd (BCorp) owns a 70% stake.

But the more notable success in the car industry for Tan in Malaysia in recent years is the revival of the Mazda brand under Bermaz that is helmed by Yeoh as the chief executive officer.

At present, the Berjaya group has indirect interests of 15.63% in Bermaz, which distributes Mazda vehicles and spare parts not only in Malaysia, but also in the Philippines, while Yeoh has 15.33% stake in the automotive company.

This came after the Berjaya group spun off its controlling interest in Bermaz (then Berjaya Auto) in July 2016. The corporate exercise involved BCorp selling a 9.09% stake, and the management of the automotive company, led by Yeoh, injecting an 8.02% equity interest into a special-purpose vehicle (SPV) called Dynamic Milestone Sdn Bhd.

Under the transaction, the management of Bermaz got a 66.3% stake in the SPV, while BCorp got the remainder 33.7% stake plus cash. The cash portion was funded through bank borrowings by the SPV.

Tan points out that the sale of the group’s control of Berjaya Auto was done for profit.

“We invested RM11mil. We took 80% and gave 20% to management and the company (grew) and was worth over RM2bil. At that value, we said we better sell. And we sold,” he was quoted as saying in an earlier interview.

Turning around business

The Mazda brand in Malaysia was initially distributed by Cycle & Carriage Bintang Bhd (CCB) via its unit Hercules Automotive Engineering Sdn Bhd.

Sales of Mazda cars in the country then was very slow, as CCB’s primary focus was on the sales of its Mercedes-Benz marque, which was generating better sales margins for the company.

In came the Berjaya group in 2008.

The group acquired Hercules Automotive Engineering, which was eventually renamed Bermaz Motor Trading Sdn Bhd, and had since become the official distributor of Mazda vehicles in Malaysia.

Sales of Mazda cars in Malaysia took off with Yeoh at the helm of the company.

From a meagre 1,000 units in 2008, when Bermaz took over the distributorship, and the number hit 10,000 units in 2013.

For the financial year ended April 30, 2016, sales volume of Mazda vehicles in Malaysia hit 15,050 units, compared with 12,209 units in the preceding year, while in the Philipines, the volume grew to 4,684 units from 3,561 units.

The turnaround of Mazda sales in Malaysia is reminiscent to the Hyundai in the mid-2000s when Yeoh was heading the operations.

From 2000 to 2007, he revamped the Korean brand under Hyundai-Berjaya Corp Bhd (which subsequently changed its name to Hyundai-Sime Darby Bhd).

Hyundai sales improved significantly under Yeoh’s reign, with sales surging within a short period of time – hitting 24,300 units in 2004 from 1,300 units in 2001, according to reports.

The Hyundai business became so successful that Berjaya group managed to sell its entire 51% stake in Hyundai-Berjaya Corp to Sime Darby Bhd at huge profits in a deal worth around RM565.2mil in 2004.

For Tan, there is one rule when it comes to business – never falls in love with any of your business.

So, everything is for sale at the “right price”.

The proposed acquisition of Oriental Assemblers, which owns a car assembly plant at a 14.74-acre leasehold parcel in Johor Baru is a transaction worth RM32.5mil and is to paid in cash.

It marks Tan’s third foray in the automotive assembly business.

In recent years, Tan has taken a step back in the running of the business to allow his son Datuk Seri Robin Tan manage the operations of the Berjaya group. However, the patriarch remains actively involved in guiding the key investment decision-making.

It will be interesting to see what will turn out with this recent venture for the Berjaya Assets.

– ANN

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