KUALA LUMPUR: The share price of Tan Chong Motor Holdings Bhd fell on June 24 as investors were quick to lock in the previous day’s gains as the decade-old dispute in the Tan Chong group of companies came to an end.

Tan Chong fell 19 sen to RM1.71, off the intra-day low of RM1.58. There were 409,400 shares done. It had risen 35 sen the previous day ahead of the announcement.

However, trading was lacklustre in Tan Chong Motor’s related companies, Warisan TC Holdings Bhd and APM Automotive Holdings Bhd. Warisan TC rose one sen to RM2 with 187,000 shares done while APM fell one sen to RM1.69 with 4,900 units transacted.

On Tuesday, the companies announced that shareholders of Tan Chong Consolidated Sdn Bhd, (which has substantial equity in all three companies), had reached a compromise in relation to the disputes.

This was based on a progressive release of a portion of the shares in Tan Chong Motor Holdings, APM Automotive, Warisan TC Holdings to the exiting minority shareholders of Tan Chong Consolidated.

Tan Chong Consolidated would hold at least 33% of the voting shares in the three companies, with a right of first refusal to acquire any of the shares which exiting minority shareholders may choose to dispose of.

Tan Chong Consolidated owns 43.5% of APM Automotive and Warisan TC and 46% of Tan Chong Motor Holdings.

Checks with the Companies Commission of Malaysia reveal that Tan Chong Consolidated has 17 directors with both leaders of the two warring factions, Datuk Tan Kim Hor (the co-founder of the three companies with his brother, the late Tan Sri Tan Yuet Foh) and his nephew Datuk Tan Heng Chew, sitting on board.

News reports from 2002, when the fight was at its ebb, stated that Kim Hor and his immediate family owned 45% of Tan Chong Consolidated, the family investment vehicle, while Heng Chew and his family owned 55%.

The Tan family has been at loggerheads since 1999, when Kim Hor attempted to wind up holding company Tan Chong Consolidated, while the faction led by nephew Heng Chew opposed the move and won.

At end-May 2002, Kim Hor was ousted from Tan Chong Motor Holdings when only 53.7% of shareholders voted to re-appoint the then 78-year-old Kim Hor, when he needed 75% of the votes to carry the resolution for his return to the board as he was above 70 years old. Similarly, APM Automotive’s shareholders voted 61% to re-appoint Kim Hor, which was also insufficient.

He was ousted at Warisan TC Holdings as well.

Kim Hor and his faction went on to take over Greatpac Holdings Bhd (which was subsequently named Wawasan TKH Holdings Bhd) in 2005.

Other than the three Malaysian companies, also in the equation was Hong Kong-listed Tan Chong International Ltd, which had its mainstay in auto distribution in Singapore, was also under the control of the family.
 
In total, the four companies collectively had annual sales exceeding RM4.5 billion, and controlled estimated assets valued at RM1.4 billion.

CIMB Equities Research said the news was a positive surprise and marked the end of the dispute. It said since the automotive business was now run by a group of professional managers who were largely overseen by Heng Chew, “we expect it to be business as usual for Tan Chong’s operations following the agreement”.

It said there should not be any changes to the strategic directorships and daily operations of Tan Chong.

“The settlement should also put to rest concerns over a disruption in operations as a result of the family discord. This should also assuage concerns over a share price overhang and the possibility of one family faction selling in the open market and depressing the share price,” it said.

CIMB Research maintained its outperform call on Tan Chong but with a higher target price of RM2.55 from RM2.05. It tagged a higher calendar year 2010 target price-to-earnings of 10 times from a previous 8.0 times, given the resolution of the feud.