Published July 14, 2009

The fight is getting tougher for the Thakrals

By EMILYN YAP

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GOING against the Hong Leong Group was challenging to begin with but the fight seems to have gotten tougher for the Thakrals.

The two major shareholders in Thakral Corp have been unable to see eye to eye on the firm's future direction. While Hong Leong believes that Thakral Corp should keep consumer electronics distribution as its core business, the founding family is convinced that a complete switch to real estate is more lucrative.

Thakral Corp's board of directors approved the business repositioning last year. To back the move, the company said that it 'will look to tap into the significant expertise and deal flow of its key shareholders, who have extensive expertise in real estate and infrastructure not only regionally, but also globally'. Hong Leong, which voiced opposition to the change, was clearly not one of those 'key shareholders'.

That left Babcock & Brown as another significant stakeholder for Thakral Corp to leverage on. Part of the Australian-listed firm's business involved the purchase and bundling of property assets into funds to earn management fees. Babcock also held stakes in another Australian developer Payce Consolidated.

In fact, Thakral did try to work with Payce. The two inked a memorandum of understanding in December last year for a series of investments in property and property-linked notes, though the agreement eventually fell through.

Unfortunately for the Thakrals, debt-ridden Babcock has been facing troubles of its own and went into voluntary administration in Australia in March. Such a situation befalls companies when they are insolvent or deemed insolvent, and an external administrator has to come up with an exit strategy for creditors.

Then, Babcock's unit Babcock & Brown Securities Singapore sold its entire 8.93 per cent stake in Thakral Corp last month. The Thakrals bought the stake but lost a key shareholder which is also in the property business. All these mean that Thakral Corp now has a slightly weaker case to back the business repositioning.

To be fair, Thakral Corp is not completely new to real estate and already has property operations in Wujiang, China. The Thakrals themselves also have relevant experience from their involvement in Thakral Holdings, an Australian-listed property company which invests in hotel, retail, commercial and residential properties Down Under.

Nevertheless, the presence of another property player on the board of Thakral Corp would have provided other shareholders with more assurance about the business shift. For now, the company will have to work harder to convince them of the merits of moving to less familiar ground.