STI: Khoo's coup

Mar 7, 2004

Khoo's coup
Hotel tycoon Khoo Teck Puat, who died two weeks ago, was known for cutting shrewd million-dollar business deals. The Sunday Times has the inside story on his greatest triumph and how he nearly lost it all by Sharon Loh

A DAY before his 69th birthday, Mr Khoo Teck Puat met the press at his Boulevard Hotel for a rare interview.

That January day in 1986, the normally shy Mr Khoo was euphoric as he recounted the audacious deal that had made him the talk of London's banking and finance community.

He had bought a 22.2 per cent stake in the British financial conglomerate, Exco International, from the Kuwait Investment Office (KIO), a day after the original owners of the stake had rejected the businessman's offer in favour of the influential Middle Eastern group.

What reporters that day didn't know was that his offer to the KIO had been made as the London exchange was about to close, and with no very great hopes that the Kuwaitis would accept.

They did, and made a £5 million profit on their £112 million investment overnight.

It was a coup for the Singapore-born tycoon because Exco owned such jewels as the money-broking firm, Astley & Pearce, and stockbroking agency W.I. Carr.

Asked by reporters if this meant he would now seek to return to the bank he had started out with but left under a cloud, Mr Khoo said: 'No, no, not in OCBC, there are bigger institutions around the world.'

That reply summed up all the disappointments of the past, and the promise of the future.

Unfortunately, though 1986 would see his greatest triumph - his role in the rescue of Standard Chartered - it would also end in the arrest of his son and his own implication over fraudulent practices involving his bank in Brunei.

At the height of that scandal, when it seemed that the Brunei government would go after everything he had, observers predicted it would end the Khoo empire. It did not.

Like every other crisis in his life, Mr Khoo survived it, and prospered.

When he died two weeks ago of a heart attack at the age of 87, he was one of Singapore's richest men, not so much because of his hotels, which were never money-making machines, but shrewd investments over the years.

Chief of this was a 13.5 per cent stake in Standard Chartered, worth around £1.5 billion(S$4.7 billion), which he reportedly once told an associate, was the 'best investment of my life'.

Yet, though his wake was attended by the rich and powerful in Singapore's corporate and political circles, Mr Khoo remained something of an outsider, set apart by choice, and almost certainly by his controversial past.

But it said something about his extraordinary energy that at the age of 69, he was set to embark on his umpteenth career.

Exco, it turned out, was just the bait to hook a larger fish: Standard Chartered Bank.

A few months before, the departing deputy chairman of United Overseas Bank, Mr Allan Ng, had approached the hotelier with a business proposal.

Mr Ng, then 44, showed him Exco and Standard Chartered's annual reports, and asked if Mr Khoo would be keen on buying a significant minority stake in Exco, which he knew was up for sale.

The figures looked good: the profitable conglomerate boasted a cash pile of £320 million. Once they had a foot in the door, Mr Ng said he planned to ask the Exco board to buy a majority stake in the undervalued Standard Chartered, which had a market capitalisation of £800 million.

Mr Khoo was excited by the idea. If there was anything he wanted, it was the chance to helm a bank again.

At 16, he had chosen not to follow his father into rice trading, and instead joined the Oversea-Chinese Banking Corporation (OCBC) as a clerk.

But he quit as deputy manager in 1959 as he could not see eye to eye with the bank's then-managing director, Mr Tan Chin Tuan, said Mr Khoo's son Ban Tian.

He reportedly wanted to expand the bank aggressively while Mr Tan preferred a more conservative pace.

Mr Khoo's ambition was not to be held back. He started his own bank in August 1960, with a paid-up capital of $5 million out of his own pocket and that of some partners. He also took with him more than 80 employees from OCBC.

Through Malayan Banking, he pioneered the concept of branch banking. Within six years, it had 104 offices, many of them in rural areas. But in 1966, he lost his position as managing director after he was held responsible for a run on the bank sparked by rumours of unsecured loans. By 1976, he was out.

Ten years later, Mr Ng's Exco proposal presented a back door re-entry into the world of banking and finance.

In making up his mind, Mr Khoo consulted a friend, the chairman of Hongkong Bank, for a view of Exco. Typically, he needed no one else to carry out any research.

His son Eric recalls that his father kept a jotter book, in which he would make furious calculations every night that only he could decipher. 'He was a one-man show,' says Eric.

And once he had made up his mind, he never changed it.

Hotelier Ong Beng Seng, who dealt with Mr Khoo a few times, says: 'The experience of transacting with him was thrilling, like an Alfred Hitchcock thriller. If he made a decision, that was it.'

His purchase of Exco, however, threw its board into dismay. They did not know if the new owner would now mount a takeover, dismember the company and sell off the parts.

The London banking community, however, was more receptive to the mavericks from Asia, who were like a breath of fresh air over the sleepy, if profitable, company.

For Mr Khoo, it was a rebirth. Normally averse to socialising, he came out of his shell to be introduced to Mr Ng's extensive London banking contacts.

But the dream of buying Standard Chartered through Exco was not to be realised.

The proposal to the board was turned down because, in the words of a source close to the two men, 'the Exco board had many money brokers and retired Bank of England officials who did not want to jeopardise their stable careers by undertaking such a major investment'.

Undeterred, Mr Khoo decided to take a stake in Standard Chartered himself.

History records him now as one of the three 'white knights' who saved the colonial offshore bank from being gobbled up by Lloyds Bank, which had sprung a surprise £1.3 billion bid.

The other two were Hong Kong shipping magnate Y.K. Pao and Australian entrepreneur Robert Holmes a Court.

Their combined last-minute purchases of 27.65 per cent of Standard Chartered's equity meant that Lloyds could not muster the stake it needed by its July deadline.

The battle was pitched in predictably geopolitical terms, with the three being hailed as 'friends from the Far East'.

It was probably the first time that so much of a British-based bank had fallen into 'Eastern' hands.

By August 1986, Mr Khoo was riding high: he had a seat on the Standard Chartered Board, which boasted several peers of the realm.

The chairman, Mr Anthony Barber, was a former Chancellor of the Exchequer.

He had also added to his Exco stake, which made him the company's single largest shareholder.

But on Nov 20, it all came crashing down when his eldest son Ban Hock, then the chairman of the National Bank of Brunei, was arrested for fraud involving bank funds. The bank was shut down.

Also charged were the bank's auditors, Andrew Peattie and Bernard Soo, and a director, Mr Chen Ping Fang, who was 72.

Mr Chen, who protested that he was on the board only because his old friend had asked him to, died before his case could go to trial.

A week after the scandal broke, Mr Khoo resigned his seat on the Standard Chartered board. He eventually sold his Exco shares, pocketing a 25 per cent profit in less than a year.

In an echo of the Malayan Banking saga, Mr Khoo was accused of using the National Bank of Brunei, owned by his family, as his own private treasury.

About 90 per cent of the bank's loans, about B$1.33 billion, had gone to companies linked to him, without proper collateral or documentation.

Mr Khoo reportedly once told an acquaintance that he had broken no law, since Brunei had none in banking to speak of. In fact, Brunei tightened its banking laws after that episode.

A warrant of arrest was finally issued for him, but his whereabouts were never known.

A year after Ban Hock was arrested, he pleaded guilty and served two years in jail.

In August the following year, his father repaid with interest the $450 million owed to various banks that had lent money to the National Bank of Brunei. The charges against Mr Khoo, though never dropped, lapsed quietly.

It was more than a year before he returned to Singapore, to live out the next 15 years with his family. In typical phoenix fashion, however, Mr Khoo rose from those ashes with a little good fortune for himself.

Creditor banks were repaid from the sale of his Australia-based Southern Pacific Hotel Chain for A$540 million. He had bought it in 1981 for A$105 million. After the settlement, there was still a good sum left over.

Again, Mr Khoo showed that he knew when to buy and when to sell.

In today's developed markets, the methods that he probably used to raise the funds for his investments have been regulated against.

But whether one considered him ahead of his time or unethical, his sense of market timing was always peerless.