Asia Inc Oct 1994
BUSINESS: Yeo Hiap Seng feud
A bitter feud has split Singapore's Yeo Clan, creating uncertainty for the
family's renowned food and beverage company.
Alan Yeo didn't know whether to laugh or cry when he stepped out of the High
Court of Singapore in late June. The presiding judge had somberly ruled that
Yeo could dissolve the private investment holding company that bound together
the shares of Singapore's Yeo family. The unmaking of Yeo Hiap Seng Holdings
marked the climax of a family feud that began in 1991. The battle ended three
generations of family unity that enabled the Yeos to flourish in the Chinatowns
of Southeast Asia and beyond.
"This is a Pyrrhic victory for Alan," says a cousin in the rival camp. Alan
Yeo, 63, saved his job as chairman of publicly listed Yeo Hiap Seng Ltd.
(YHS) -- which literally translates to Yeo Unite to Succeed -- but for how
long? He heads a $ 165 million food and beverage company with an uncertain
The Chinese adage, "the first generation builds, the second preserves, the
third destroys," rings true. But in traditionally consensus-seeking East
Asia, the Yeos' is the first battle over a family business fought in the
glare of publicity.
YHS, like many successes in the region, had become too large and diversified
to be run as a family business. According to Alan Yeo, too many family members
interfered with the running of the company. He says they expected to be consulted
on every major decision -- a violation of the Singapore stock exchange's
disclosure requirements. The way he sees it, breaking up the holding company
was necessary because the spirit of family partnership had been destroyed.
Within a week of the ruling, he sacked three relatives who had collectively
worked for YHS for 67 years. Among them: board member Charles Yeo, a former
senior vice president whom his uncle Alan had once identified as a potential
successor. Charles had led the movement to oust Alan.
Things weren't always this rancorous. At the height of family unity, most
of the 46 surviving Yeos worked for YHS -- a business started in China's
Fujian province by patriarch Yeo Keng Lian at the turn of the century. After
moving to Singapore in 1935, the family set up a sauce factory. Despite stiff
competition from other players such as Tai Hua Food Industries, Sinsin Food
Industries and Woh Hup Food Industries, the Yeos grabbed market share with
a strong distribution network. Even as business flourished, the Yeos stressed
the importance of family. They had a saying: "We are as close as our own
flesh and blood. We must be united from the beginning to the end."
YHS went on to become so successful that in 1987 Alan Yeo, head of the company
since it went public in 1969, was named Singapore's Businessman of the Year.
The award presenters praised the clan for being "a superb example of a family-controlled
business" that others could emulate. Soon Yeo was appointed chairman of the
Trade Development Board (TDB) and invited to join the boards of government-linked
companies like Keppel Bank and Neptune Orient Lines. He was leading TDB delegations
to new markets. But while he was winning the war for Singapore, he was losing
the battle at YHS.
The slow deterioration at YHS came to a head in 1991. That year the company
posted its first loss, $ 800,000, largely due to red ink from its U.S. subsidiary,
Chun King. YHS and Temasek Holdings, the investment arm of the Singapore
government, had bought the troubled American manufacturer of canned Chinese
food in 1989.
The $ 52 million Chun King acquisition, spearheaded by Alan, was a disaster
from the start. Analysts and family members alike felt YHS had overpaid.
They were right. In four years, the subsidiary has posted loses totaling
$ 36 million. The company's products have lost much of their appeal in the
U.S., where even the smallest towns now have take-away Chinese restaurants.
Mistrust began replacing kinship. This year a group of Yeos began attempts
to push out Alan as chairman. Its reasons: the Chun King fiasco, his inability
to choose a successor and alleged autocratic leadership and bad management.
Alan fought back, going directly to the shareholders. In a letter to them
in June, he wrote: "You can make a difference. Protect your investment. Vote
against my removal." He also hired public relations firm Burson-Marsteller.
Overnight his autocratic image was transformed. The Straits Times newspaper
promptly wrote a fawning profile of him.
In public he contemptuously derided his rebellious kin as "kids running around
without their pants on" while he had been building the company. By winning
the suit to dissolve YHS Holdings, wholly owned by the Yeo clan, Alan and
relatives loyal to him freed up their 18.2 percent stake in YHS Ltd. from
the family investment block. Otherwise, the nearly 21 percent held by the
other Yeo group, and therefore the majority in the holding company, easily
could have voted to get rid of him.
Amid all this, YHS's stock price became increasingly volatile, and shareholders'
ire rose. One disgruntled investor wrote in Singapore's Business Times: "When
will the Yeo family stop boring us and get on with running a company that
is quite obviously going downhill?"
With the battle over -- at least for the moment -- Alan Yeo says it's back
to business. "The dissolution of the holding company was very sad," he says.
"However, that is all behind us now, and we look forward to implementing
the exciting plans we have in place." They include the sale of money-losing
Chun King (YHS recently took a $ 30 million write-off on the company) and
a joint venture with PepsiCo Inc. to explore markets in Indochina and China.
Even greater hopes are tied to the redevelopment of a 4.4-hectare site at
Bukit Timah, a former tin mine, on which two YHS plants sit. Because of government
rezoning, the factories have to be torn down by 1998.
With the wooded area around the factories rapidly developing into desirable,
upscale residential units, YHS plans to develop a condominium complex on
its $ 180 million plot of land.
The project could yield a windfall. Hong Kong's potential loss in the run-up
to 1997, when the territory reverts to China, could be Singapore's gain.
The republic's residential and commercial property markets are expected to
China's food and beverage market also looks promising. In two years the mainland
is likely to overtake Singapore as YHS's biggest revenue earner. Says a sobered
Alan Yeo: "A listed company's priority lies with its shareholders and employees,
not the family -- no matter how painful this might be."