US Edition The Yeoh Tiong Lay family runs one of Malaysia's top groups, writes Mary Fagan. It bought Wessex Water as a springboard to expansion in the West
A WEEK ago this morning the Royal Bank of Scotland was ready to tell the world that it had become the proud owner of Wessex Water.
The bank had been in talks - which it thought were exclusive - with Azurix, the US owner of the West Country water and sewage business. Yet hours earlier Azurix had agreed to sell Wessex for £1.24bn to a Malaysian company virtually unknown in Europe, the family-controlled YTL.
Although YTL had been on the short list, RBoS was certain that it had outbid its rival - so certain that it had agreed to sell most of its holding in Portsmouth Water to Abbey National in an attempt to minimise any regulatory concerns over the Wessex deal. YTL was in any case always seen as a most unlikely candidate to want a relatively small UK water and waste business.
But RBoS, it seems, had lingering concerns that there could be risks associated with Enron, the collapsed energy trader which owns Azurix. Fearful that any deal would be riddled with caveats and desperate for money to buy back its high-yield bond debt, Azurix turned again to the Malaysians. Now YTL is here to stay.
The Yeoh Tiong Lay family is a legend in its home territory. It owns businesses from cement manufacturing, construction and power generation to a luxury resort island, Palau Pangkor Laut, off the west coast of Malaysia.
Under Francis Yeoh, the eldest son of the founder who gained his engineering degree at Kingston University near London, the YTL group has grown from a small but profitable business focused on cement and building into one of Malaysia's ten largest groups.
Yeoh has pushed YTL into the big league, bidding for and winning contracts to build hospitals and airports as well as Malaysia's National Art Gallery. Among its biggest live projects is the construction of Malaysia's equivalent of the Heathrow Express - the Express Rail Link from Kuala Lumpur to the new international airport.
Along the way YTL has also become an enthusiastic owner of regulated utility-type businesses, driven by a perceived need to stabilise as well as grow the revenue base. The group was something of a pioneer in Malaysia in the establishment of independent electricity generating plants using modern combined cycle gas technology.
YTL Corporation now owns 60 per cent of YTL Power International, which like its parent is listed on the stock market in Kuala Lumpur. YTL, which gained its own listing in 1985, has since also floated two other subsidiaries, YTL Cement and YTL Land.
Yeoh has been famously careful about the group's finances, perhaps mindful of how the family firm almost went under in the early 1970s when a recession in the region sent the price of construction materials sky high. Under his guidance YTL group weathered both the recession of the 1980s and the Asian financial crisis which battered the region in the 1990s.
Much of the group's apparent financial resilience Yeoh attributes to his philosophy of never borrowing in foreign currency. YTL even made a small contribution to Malaysia's financial history when in 1993 it raised debt through the issue of long-term ringgit bonds.
Yeoh plays down the perception that he is very close to Malaysia's prime minister, Mahathir Mohamad, or that the group has benefited from his political ties. But in spite of his insistence that he is merely a taxpayer it was notable that, on the prime minister's recent official visit to Germany, Yeoh was there as part of a select entourage.
Now the YTL dynasty wants greater things - and it wants to make its mark in developed economies. Already the group has expanded into Australia with the acquisition in 2000 of ElectraNet, an electricity transmission network, and it is also bidding for three electricity generating businesses in Singapore.
Yeoh has Europe firmly in his sights and, like many before him, he sees the UK as the easiest and most accessible place to start.
Bankers say YTL has quietly looked at a number of UK utility businesses over the last few years, but with big guns such as Germany's RWE and Electricité de France willing to over-pay for assets, it never had much of a chance.
When Wessex became available it appeared to YTL like a digestible bite. Although Enel of Italy was very interested in Wessex at one point, most of the interest came from rational financial bidders rather than industrial giants with deep pockets and a willingness to pay a high price.
This is YTL's first foray into water, but it is only the first stage of its European adventure. Yeoh is interested in buying electricity distribution networks in the UK and elsewhere in Europe although he is not expected to bid for Seeboard, the regional electricity company being sold by its US parent, AEP.
Analysts say the Malaysians will use the Wessex experiment not just for stable cash flow but to gain experience with European utility regulation in preparation for expansion in the next few years.
For now, YTL appears happy to let the existing management team keep running the business. To Colin Skellett, chief executive, such stability after months of uncertainty will no doubt come as a relief. Skellett has been frustrated by Azurix's disastrous attempts to build an international water business with Wessex as its pivot, and the ensuing messy contraction.
Skellett wants to focus back on the Wessex region and on his relationship with the customers. They more than most will want to know what happens now that Kuala Lumpur has discovered Bath.