Ever Wondered How Far East Organisation Became Yeo Hiap Seng’s Majority Shareholder?

 

When Yeo Hiap Seng is mentioned in these parts of the world, I am sure that most of us will remember their famous yellow chrysanthemum packet drinks!

 

As mentioned in our earlier article, Yeo Hiap Seng Ltd (SGX:Y03) can be considered as one of the beverage giants in Singapore and Malaysia with house brands like H-Two-O, Yeo’s Asian Beverages, Justea and Pink Dolphin.

I think that most of us know about what Yeo’s does on their beverage arm. However many of us might not know how Far East Organisation became their largest shareholder giving them a boost in their property operations, which has been a significant contributor to their bottom line in recent years. Its not everyday that you see a family divesting their business.

Have you ever wondered how Ng Teng Fong’s Far East Organisation became the majority shareholder of Yeo’s?

 

 

Let us bring you back in time to one of Singapore’s more colorful takeover battles!

 

What Led To the Change in Control of Yeo Hiap Seng?

When we go through the historical records, two key catalysts stood out.

1. The alleged family feud which lead to the dissolution of the Singapore Yeo’s family private investment holding company in the third generation of the family. Maybe this is where the Chinese phrase of 富不过三代 which simply translates to mean that “Wealth does not pass three generations”

2. Government’s rezoning of the land where Yeo Hiap Seng’s factories were located to residential land = prime real estate

 

Trouble Brewing In The Yeo Family

 

 

What made this unique in Asia was that this family feud that played out in the eyes of the public. The circumstances that led this event were common problems faced by families that might have gotten too large and diversified to handle purely as a family business. This was rather ironic given that the meaning of Hiap Seng was unite to succeed. Yeo Hiap Seng literally meant Yeo Unite to succeed!

Everyone has a different objective in life, hence it isn’t inconceivable that with many of the Yeo family involved in the business, and it would not be easy for everyone’s interest to be aligned especially within the structure of an extended family when the patriarch (Yeo Thian In) is no longer in the picture.

Things did not seem to be all smooth sailing and the last straw that broke the camel’s back was said to be from Yeo Hiap Seng’s US$52 million acquisition (Joint acquisition with Temasek Holdings) of Chun King, an American manufacturer of canned Chinese food in 1989. Right from the start, many felt that Yeo Hiap Seng had overpaid for this acquisition and they were seemingly vindicated with the loss accumulated by Chun King in the subsequent years post acquisition.

One thing led to another and there was a power struggle within the company with the Yeo family divided in their support resulting in a coup-like ousting of the Chairman during this period. At the end of the day, the court ruled in favour of the dissolution of the family holding company. This meant that the Yeo’s family 38.5% collective stake could potentially be split up.

This was when outside investors could possibly become the majority shareholder. And Ng Teng Fong was such an investor.

 

But Why Would Property Tycoons Be Interested In the Beverage Business?

This was where the rezoning of the 4.4 hectares of factory land at Bukit Timah into residential land came into the picture. This meant that Yeo Hiap Seng was potentially sitting on a goldmine of prime real estate!

Not one but two property tycoons were hotly involved in the race for control of Yeo Hiap Seng in 1995. In June 1995 when Ng Teng Fong’s Far East had 24.9% stake in Yeo Hiap Seng, Quek Leng Chan (Founder of Hong Leong Group Malaysia) led a consortium involving three other heavyweights involving Sembawang Corporation (Through Sembawang Industrial Pte Ltd), Haw Par Brothers International (Through Straits Maritime Leasing Pte Ltd) and Salim Group (Through KMP) also had a stake north of 20%!

This resulted in a back and forth bidding war in the 2^nd half of 1995. Eventually after a couple of counteroffers, Ng Teng Fong’s Far East took control of 87% of Yeo Hiap Seng. And until today, Far East stood as the largest holder of Yeo Hiap Seng.

 

Value In Action

 

Sometimes, it’s interesting just to find out how things actually unfolded. It’s not every day that you see a household name like Yeo Hiap Seng changing hands out of the founding family. I hope that you have learnt as much as me from this little bit of history.

 

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All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.

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