The Raiders Are Riding

By most standards, Singapore food-and-beverage group Yeo Hiap Seng Ltd. (YHS) doesn't look like an attractive takeover target. It had sales of just $187 million last year. Its 1989 purchase of U.S. food company Chun King saddled it with losses. Its bottling business has been losing market share. And its lucrative franchise for Pepsi-Cola expires this summer.

For all its liabilities, YHS is sitting on one important asset: property. That's driving a fierce takeover battle between rival developers, who have been increasing their stake in YHS over the past few months. In one camp is Singapore property magnate Ng Teng Fong, the largest single shareholder--with nearly 25% of the company. In the other is Malaysian tycoon Quek Leng Chan, with 23%. Quek has aligned himself with Alan C. Yeo, scion of the 95-year-old company's founding family, whom Ng forced out as chairman last year.

FAMILY FEUD. The battle illustrates how traditional family-run Asian companies are becoming vulnerable to Western-style raiders. Losses from the $52 million Chun King acquisition fiasco left YHS open to a takeover, says Andrew Ho, an analyst at RHB-Cathay Research. "They just kept the business running in the hope it would turn around," he says. With no recovery in sight, members of the Yeo family began feuding. That led last year to a court-ordered liquidation of the family holding company. Enter the real-estate moguls.

Turning YHS into a real estate empire may be a lot easier than reviving its core bottling business. It faces tough new competition: In Singapore, YHS's market share of carbonated drinks fell from 35% to 30%. Profits on total beverage operations fell by some 25%, to $4.8 million. The company's Pepsi contract expires in July, and it's not clear whether Pepsi will renew. In March, YHS sold the bulk of Chun King's assets to U.S. food company Hunt-Wesson Inc. for a paltry $10 million.

Despite its many problems, YHS has some key real estate holdings that have attracted Ng and Quek. Its Singapore factories sit on land rezoned for residential development. The combined sites--nearly 43,000 square meters--are worth more than $210 million, according to property consultants Richard Ellis.

DRIVER'S SEAT. In the battle to gain control, Ng is in the driver's seat. He has the support of a majority of the eight-member board, including Michael Yeo, Alan's cousin and rival. Last year, Ng was also able to block a plan by Alan Yeo and Quek to sell YHS's Malaysian subsidiary for cash. Recently, Ng named Alex Chan, former head of Hewlett-Packard Singapore Ltd., as CEO.

Still, Quek is turning up the heat. He acquired 2% more of YHS in mid-April. While Ng's publicly listed property company, Orchard Parade Holdings, has given him the go-ahead to gain a majority stake, that would mean borrowing heavily to finance the estimated $110 million deal. Such spectacles could become more common as Asia's financial markets develop.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE