SINGAPORE: A three-year corporate fallout between two of Southeast Asia’s tycoons, Malaysian T Ananda Krishnan and Indonesian James Riady, may have come to an amicable close.

This follows an agreement between the duo yesterday for Ananda to make way for Riady to assume full control of Singapore’s second-largest hotel operator, Overseas Union Enterprise Ltd (OUE).

According to a Bloomberg report yesterday, Riady’s Lippo is doubling its stake in OUE following a deal to acquire the additional interest from Ananda’s Usaha Tegas Sdn Bhd for S$957 million (RM2.29 billion).

Lippo agreed to pay the Malaysian company S$11 per share to bring its controlling stake to 88.5%, Lippo said in an emailed statement. Riady’s brother Stephen, who is Lippo president, has been named OUE executive chairman.

The tussle for control of OUE between the two parties had been under arbitration. Ananda and James Riady had acquired their respective stakes in OUE in 2006 from United Overseas Bank.

OUE shares rose S$2.94, or 33%, yesterday to S$11.98, the biggest increase since Oct 2, according to Bloomberg.

OUE owns hotels in Singapore, Malaysia and China. According to Reuters, its best-known properties are the five-star Meritus Mandarin and Marina Mandarin hotels in Singapore. Bank of America’s Merrill Lynch advised Lippo in the transaction.

This comes more than two weeks after Ananda’s Astro All Asia Networks plc won a US$230 million (RM768.2 million) award from the Singapore International Arbitration Centre pertaining to its claims from the failed joint venture (JV) with Lippo Group in the pay-TV business in Indonesia.

Astro had to bear writedowns relating to this investment  totalling RM1.16 billion over the past few years, as well as unsubstantiated police reports of fraud against Astro employees in Indonesia and illegal payments, leading to its Malaysian staff having to operate from Malaysia.

The strong alliance between the two tycoons started with tremendous potential about five years ago but turned sour over business deals, leading to numerous legal and arbitration battles.

The alliance started in early 2005 with the setting up of the JV to operate a pay-TV business through Lippo’s subsidiary PT Direct TV (PTDV).

The common belief then was that Astro would eventually hold a stake in PTDV as well, but that never materialised, as the JV was riddled with problems from the outset.

However, initial problems besetting their corporate dealings did not stop the then nascent partnership from developing further.

In April 2005, Ananda’s Maxis Communications Bhd acquired a controlling 51% stake in Lippo’s wholly owned cellular telephone company Natrindo for US$100 million.

In May 2006, Usaha Tegas and Lippo took control of OUE for a total of S$1.8 billion in a deal that was touted as a corporate coup in Singapore.

Then in April 2007, amid Astro’s unresolved issues with Lippo over PTDV’s operations as well as ringing up of unpaid-for services, Maxis bought out Lippo’s remaining 44% stake in Natrindo for US$124 million. This would be the start of the fallout between Ananda and James Riady.

Two months later, Ananda sprang a coup of his own when he roped in Saudia Arabia’s Saudi Telecom as a partner with 25% of Maxis Communications and 51% of Natrindo in a massive US$3.05 billion deal.

The Saudi deal riled James Riady who felt betrayed and left out in the cold, without being able to profit from it. James Riady’s allies accused Ananda of lining up Saudi Telecom as a potential partner even before the Natrindo deal was concluded, a claim Ananda’s camp refuted.

“A huge loss of face” for James Riady was what one report put it, and relations between the two partners deteriorated rapidly.

The issues pertaining to the pay-TV business in Indonesia went unresolved and their relationship in OUE also turned acrimonious, with Ananda’s associates claiming they had not much say in the running of the Singapore-listed company.

That dispute eventually ended up in arbitration, while yesterday’s agreement over the sale of Ananda’s OUE shares at a premium over the market price would suggest an amicable end to the fallout.

With the latest development, expectations are also high that Astro will get its dues from the arbitration claims soon. Analysts had earlier expressed concern that Astro, notwithstanding the award, may yet take some time to get the award money.

The amicable settlement in OUE could well be the final part of the untangling of the business ties between two of the wealthiest men in Southeast Asia.


This article appeared in The Edge Financial Daily, March 10, 2010.