Controlling Hong Leong Investment Holdings vital for taking charge of CDL&rsquo s board

 

BATTLE lines are being drawn in the father-son tussle for control at mainboard-listed real estate player City Developments Ltd : C09 -2.34% (CDL), involving Singapore&rsquo s richest clan.

 

On one side stands 84-year-old executive chairman Kwek Leng Beng, whose name is synonymous with CDL. On the other side stands his son, Sherman Kwek, who is CDL&rsquo s group chief executive officer.

 

With father and son in conflict and the majority of the board backing Sherman Kwek, might Kwek Leng Beng&rsquo s position at CDL&rsquo s helm be in jeopardy?

 

Much could depend on where the rest of the family stands.

 

Some of the key players who could swing the tide of the battle include Kwek Leng Beng&rsquo s cousins Quek Leng Chan, Quek Leng Chye and Kwek Leng Kee, who have substantial holdings in Hong Leong group vehicles that control CDL.

 

Quek Leng Chan, who was ranked Malaysia&rsquo s second-richest man in 2024 by Forbes, heads Hong Leong Company (Malaysia) and is chairman of GuocoLand his brother is Quek Leng Chye. Kwek Leng Kee is the assistant managing director at Hong Leong Holdings (HLH) and a director at Hong Leong Finance.

 

In 1969, Kwek Leng Beng helped Hong Leong Group &ndash then helmed by his father Kwek Hong Png &ndash buy into CDL. That same year, at only 28, he joined CDL&rsquo s board.

 

Kwek Leng Beng last week filed court papers to deal with an &ldquo attempted coup&rdquo by Sherman Kwek, directors Philip Lee Jee Cheng and Wong Ai Ai, and other directors acting with them to allegedly consolidate control of the board and the group. He also sought to remove Sherman Kwek as CDL&rsquo s group CEO.

 

Sherman Kwek, on behalf of the majority of CDL&rsquo s board, countered that the primary reason for the dispute with the chairman relates to &ldquo a very serious issue of corporate governance&rdquo within the CDL group. This, he said, arises from the conduct of Catherine Wu, an adviser to the board of CDL&rsquo s Millennium & Copthorne Hotels, who has a &ldquo long relationship with the chairman&rdquo .

 

Hong Leong Investment Holdings is key

Based on latest filings on the local bourse, Hong Leong Investment Holdings&rsquo (HLIH) direct and deemed interests total around 49.3 per cent of CDL&rsquo s shares.

 

This refers to shares directly and/or indirectly held by companies in which HLIH is entitled to exercise or control the exercise of not less than 20 per cent of the votes attached to the voting shares.

 

Ultimately, garnering support from shareholders holding the most number of shares can translate to getting board control. Here, Kwek Leng Beng holds much sway due to his large shareholding at Kwek Holdings &ndash a major shareholder of HLIH.

 

Based on filings, HLIH and HLH hold the largest direct stakes in CDL with about 18.9 per cent and 16.7 per cent of CDL&rsquo s total shares, respectively, as at Jun 21, 2024, excluding treasury shares.

 

HLIH, in turn, holds about 61.8 per cent of HLH&rsquo s shares, based on information downloaded from data analytics firm Handshakes last week.

 

This confers HLIH power to control how HLH votes on shareholder matters at CDL. And how HLIH votes on board appointments at CDL can likely prove decisive as to whether board nominees get the requisite level of support.

 

HLIH also owns a majority stake in Hong Realty, which in turn holds about 3.8 per cent of CDL&rsquo s shares, according to the latest annual report. 

 

Key who controls HLIH

Kwek Holdings

 

Data from Handshakes showed that Kwek Holdings holds a large stake of 29.1 per cent in HLIH.

 

Its largest shareholders are Kwek Leng Beng, Sherman Kwek, and Kwek Leng Beng&rsquo s sister Kwek Geok Luan, with shareholdings of about 43 per cent, 14.9 per cent, and 12.5 per cent, respectively.

 

Kwek Leng Beng&rsquo s nephew Kwek Eik Sheng, who is CDL&rsquo s chief operating officer, holds a 10.3 per cent share.

 

Kwek Leng Beng is well-placed to control how Kwek Holdings votes at HLIH on CDL matters, unless Sherman Kwek can persuade many of the other shareholders to back him.  

 

Davos Investment Holdings

 

While Kwek Holdings holds a significant stake in HLIH, it is Davos Investment Holdings that is HLIH&rsquo s largest shareholder, with a stake of about 33.6 per cent, Handshakes data indicated. 

 

But neither Kwek Leng Beng nor Sherman Kwek holds shares in Davos.

 

Davos&rsquo largest shareholders are Kwek Leng Kee, Quek Leng Chan and Quek Leng Chye, who hold stakes in Davos of about 41.9 per cent, 15.3 per cent and 15.3 per cent, respectively &ndash making them potential kingmakers in the Kwek Leng Beng-Sherman Kwek tussle over CDL&rsquo s board.

 

Other members from Quek Leng Chan and Quek Leng Chye&rsquo s branch of the family hold the remainder of Davos shares. Thus, this branch of the family has a major say in how Davos votes at HLIH.

 

Various family members, including Kwek Leng Keow and Kwek Leng Peck

 

Outside the top two shareholders, HLIH&rsquo s next biggest shareholders are Kwek Leng Keow and Hong Leong Asia&rsquo s executive chairman Kwek Leng Peck, who are cousins of Kwek Leng Beng and Quek Leng Chan.

 

Kwek Leng Keow and Kwek Leng Peck hold stakes of about 7.8 per cent each, followed by another cousin, Quek Seok Choo, with a 4.8 per cent stake.

 

Kwek Leng Beng and Sherman Kwek directly own about 1.7 per cent and 0.8 per cent, respectively, in HLIH. Other family members also own small stakes in HLIH.

 

Forming a majority

With no majority shareholder at HLIH, the question becomes how various shareholders could come together to form a majority at the HLIH level. Their decisions on whether to support Kwek Leng Beng or Sherman Kwek in the tussle would be critical. 

 

Assuming Kwek Leng Beng gets majority support at Kwek Holdings and Davos&rsquo backing, he will secure a voting block at HLIH with a commanding majority.

 

However, if Davos breaks ranks with Kwek Holdings, a scramble may ensue to garner support from other shareholders to reach a majority position at HLIH.

 

Should Kwek Leng Keow and Kwek Leng Peck stand with Davos, they just need shareholders holding less than 1 per cent of HLIH to secure a majority.  

 

A combination of Davos, Kwek Leng Keow, Kwek Leng Peck and Quek Seok Choo will garner a majority of HLIH&rsquo s shares.

 

Kwek Leng Beng and Sherman Kwek have issued hard-hitting statements on what is good for CDL. However, animosity at the board level hurts CDL.

 

Already, several brokerage analysts have downgraded their calls and price targets for the counter, and the group&rsquo s share price plunged when trading resumed post-announcement of the board dispute.

 

Can father and son quickly bury the hatchet? If the father-son rift at CDL persists, their fates may lie with how other family members view matters such as Wu&rsquo s involvement and who should lead the group.

 

Outcomes could range from a board that supports Kwek Leng Beng, or Sherman Kwek, or another family member.

 

In the CDL saga, look out for whether Kwek Leng Beng&rsquo s cousins, such as Quek Leng Chan, who is chairman and major shareholder of GuocoLand : F17 0% and has been seen as a long-time competitor, back him or not.