F&N’s CEO Hunt Halted As Hsien Yang Rethinks Strategy

Source : The Business Times, November 12, 2007

Chairman to review splitting of company: sources

Fraser & Neave (F&N), the local food and beverage giant, which is also in property and publishing, has temporarily ceased its search for a new chief executive officer following the departure of Han Cheng Fong a month ago over differences with the board.

At the time of Dr Han’s departure on Oct 5, F&N in a press release said that pending the appointment of a new chief executive, the board’s chairman ‘will oversee management of the group’.

Sources said that former Singapore Telecommunications head Lee Hsien Yang, who took over the chairmanship of the company on October 15 and who has been overseeing the group’s management since, suspended the search, pending a review of the group’s future direction - whether it should remain in its present form or split into its three major components.

It is not known how long the review will take but in the meantime, Mr Lee appears to have been taking a hands-on approach and meeting all the department heads to get to know the company’s current structure.

Among the differences that had caused Dr Han, 65, to leave F&N after seven years with the group, was the proposal to hive off and possibly relist the property and publishing arms of the company on the local bourse.

Dr Han was said to have been asked by former chairman Michael Fam to present a paper on the proposal. While Dr Han himself is said to have not expressly opposed the idea, the paper presented by him after consultations with the group’s top management showed that most felt that a split, especially just five years after the publishing and property companies - Centrepoint Properties and Times Publishing - had been privatised and placed under F&N’s direct control, would have more negatives than positives.

Many, it seems, felt that morale among staff would be adversely affected by fears of retrenchment and lay-offs.

When the TimesPub and Centrepoint Properties were taken private Dr Fam in giving the rationale for the privatisation said: ‘The privatisation of Centrepoint and TimesPub is aimed at restructuring F&N into a stronger and more flexible group, to further enhance shareholder value and sustain long-term growth … F&N, as an entrepreneurial shareholder in these companies, already plays a proactive and pivotal role in charting the strategic directions of these businesses. The privatisation of Centrepoint and TimesPub will give more flexibility in managing their resources.’

Dr Fam then went on to add that ‘through appropriate rationalisation and consolidation measures, we hope to realise greater synergies within the group - for instance, by sharing best practices and tapping on the combined wealth of experience, knowledge and expertise of the management teams’.

However, there is now a school of thought that feels that splitting up the company into food and beverage, property, and publishing would fetch better value - the so-called ’sum of parts’ theory.

This school feels that the publishing unit, whose performance has been relatively poor, is a drag on the group’s share price.

The group also notes that circumstances have changed since TimesPub and Centrepoint Properties were taken private. Then, the property market was in the doldrums, but despite recent government measures to quell speculation, it has been holding up pretty well, and is now one of the biggest contributors to group profit.

So it is no surprise that Mr Lee now wants to take another look at the arguments for and against the splitting up of the group and possible divestment or public offerings of the property and publishing units.

How the two biggest shareholders, the Oversea-Chinese Banking Corporation group and Temasek Holdings, view the matter is not known. But OCBC, which has a near 20 per cent stake in F&N, and the government holding company, which paid $900 million for a 15 per cent stake in F&N last December, will want the best returns possible.

Meanwhile, Dr Han has, since the beginning of November, joined the Hong Kong-listed arm of local property magnate Ng Teng Fong. Dr Han has been appointed chief executive of Sino Land’s China operations, and also chief executive of another of its units, Far East International.

The Sino Group, which has a market capitalisation of over $21 billion was reported to have said: ‘The (Dr Han’s) job is to expand our real estate interests in China and other markets of interest.’ Dr Han is also expected to look after the group’s interest in Singapore’s Fullerton Hotel, which includes Fullerton Waterboat House, The Fullerton Hotel, One Fullerton with its trendy restaurants, and its recently acquired Collyer Quay site.