Salim Group defends UIC performance

Salim Group defends UIC performance

SINGAPORE (Reuters): Indonesia's Salim Group, which is trying to sell its 23 percent stake in Singapore's United Industrial Corp (UIC), said on Thursday it was pleased with the company's profit record.

"We are happy with UIC's performance. The 1998 profit was down but that is to be expected with the difficult market and high interest rates," Tan Kong King, Managing Director of KMP Pte Ltd, a Salim unit, told Reuters in a telephone interview.

"If you look at all the other recent (Singapore) property companies' results, almost all of them made losses. If you see it in context, one must be quite happy," Tan said.

UIC's profit record was in focus as it was cited as the reason for Hong Kong's Payson Cha to walk away from a S$310.9 million ($180 million) deal to buy Salim's UIC stake.

Cha's HKR International's last minute decision on Wednesday to pull out of a proposed UIC acquisition was based on the fact a profit warranty given by Salim on UIC was breached.

Tan dismissed market speculation that KMP was unaware of UIC's profit record when it signed a conditional agreement to sell its stake in the company to HKR International.

Though the Salim group was UIC's largest shareholder, it had allowed Singapore banker Wee Cho Yaw, the second largest UIC shareholder, to lead the company.

"People choose to sensationalize that we were not aware of UIC's accounts. Of course we know, we are on the board. Wee Cho Yaw also told us about the profit fall but we were relying on other things for the deal to go through," Tan said.

KMP had given a warranty in early March to HKR that UIC's 1998 bottomline profit and net tangible asset (NTA) would not fall by more than 35 percent from the previous year.

UIC later reported a 44 percent drop in its bottomline to S$34.41 million, and a 26 percent fall in NTA to S$1.36 a share.

Tan said despite the results in mid-March, HKR continued with its due diligence on UIC and subsequently requested an extension of the deadline for the completion of the deal.

He said he understood that HKR "was more interested in the underlying asset value of the company rather than the profit of the company in one year".

UIC's main asset its 56 percent stake in Singapore Land, the largest owner of prime office space in Singapore.

Tan noted the short-fall in the profit was "only S$5 million and it was due to extraordinary items which were non-recurrent in nature".

He declined to speculate whether there were other reasons for HKR pulling out.

Tan also said Salim was committed to sell its UIC stake as part of the group's restructuring efforts.

"After HKR, we are willing and ready...but the terms must be favorable to KMP."

He said there was a new party, not a Singaporean or Singapore company, that the group was in negotiations with for UIC but he could not say when a deal might be concluded.

Tan also said the new party was aware of Wee's leadership at UIC and added that "it is not an issue".