Kwek Leng Beng-Sherman tussle at CDL can destroy value

Investors buy into listed groups where families hold major stakes and are active in management, partly because they see families with skin in the game taking the long-term view in growing the business.

However, families can be prone to conflict among members. Such conflict within billionaire business families, while making for good drama, can hugely damage a company’s business prospects.

In 2020, non-executive director Kwek Leng Peck left City Developments Limited (CDL), which is a member of the benchmark Straits Times Index, after more than three decades in the role, citing disagreement with the board and management on the group’s investment in Chinese firm Sincere Property Group, and reservations over the management of the UK-based hotel arm. He is the cousin of CDL’s executive chairman Kwek Leng Beng, who also heads Hong Leong Investment Holdings (HLIH) and is ranked among Singapore’s richest by Forbes. HLIH holds a direct and deemed interest of more than 49 per cent in CDL. 

On Feb 26, bombshell news emerged that Kwek Leng Beng had filed court papers to deal with the “attempted coup” by Sherman Kwek, Philip Lee, Wong Ai Ai and directors acting with them to allegedly consolidate control of the board and the group.

Kwek Leng Beng wants to remove his son Sherman as CDL’s group chief executive officer, citing the latter’s circumventing of corporate governance laws. He also said that since Sherman Kwek became CEO in 2018, there have been serious missteps, including the Sincere Property debacle that led to a S$1.9 billion loss for CDL in 2020, and poor investment decisions in the UK property market.