Friday 23 December 2011

Proton sale will involve a general offer

KUALA LUMPUR: The sale of Proton Holdings Bhd would be subjected to a general offer as Khazanah Nasional Bhd is looking at selling its entire 42.7% equity stake in the national carmaker.

Khazanah managing director Tan Sri Azman Mokhtar said in written replies to The Edge weekly that they have been receiving offers for various forms of collaboration, including acquiring its controlling stake in Proton but have not arrived at any decision to sell to any particular offeror.

He said Khazanah would have to take into account how the divestment would help upgrade the national car manufacturer and also the domestic automotive industry as Proton was an integral part of the national industrial policy.

“For minority shareholders, we can confirm that Khazanah views any sale to be done on the full 42.7% of its stake and that would mean that it would therefore, under the takeover code, be subjected to a general offer,” he said.

In written replies to a special focus on public private partnerships featured in The Edge weekly’s year-end issue, Azman touched on reasons why Khazanah was disposing its stake in Proton.

The national car manufacturer has been in the news of late as it was reported that several parties were eyeing Khazanah’s stake. Among the more serious bidders are DRB-Hicom Bhd and the Naza group.

Azman has confirmed that the sale of Khazanah's 42.7% stake in national carmarker Proton would, under the takeover code, be subjected to a general offer.


It has also been reported that Sime Darby Bhd’s automotive division and US-based General Motors may also be interested in Proton.

However, it is learnt that the bidders, especially the local automotive groups, are not keen on undertaking a general offer for the rest of the shares in Proton as it would strain their financial resources.

An official close to one of the local bidders said that if the takeover of Proton involved a general offer, then the offeror might not have enough resources to inject more capital to revive Proton.

“Proton needs cash to develop new models. If the takeover involves a general offer, it will be difficult for the offeror to develop Proton,” said an official.

At RM4.46 per share, Proton has a market capitalisation of RM2.45 billion. However Proton’s net asset per share is RM9.81 as at Nov 29, 2011, indicating that the company has a lot of assets. Among the prime assets in Proton is its land where the Shah Alam plant is currently located.

One way to unlock value is to shift the Shah Alam plant to Tanjong Malim where Proton has built a huge manufacturing plant that is under-utilised. In fact in 2007, Sime Darby had expressed interest to take over Proton mainly to capitalise on its land bank that is next to its successful township in Subang Jaya.

Apart from Proton, Azman also talked about why Khazanah went into a share swap with the Tune Air group, in which it ended up with a 10% equity stake in AirAsia. In return, Tune Air has a 20.1% stake in MAS.

The deal has come under fire from critics who questioned why Khazanah went into the share swap exercise at the time when the share price of MAS was weak while AirAsia was flying high.

Azman had said that Khazanah did extensive due diligence and any proper analysis would show that the swap was done at proper valuations and prices. He said that most analysts had a buy call on AirAsia and sell call on MAS.

“Even so, the correct or rather complete way to view the swap in financial terms is actually to anticipate what would be the value of holdings had we not done such a swap,” he said.

He said that it was clear the situation in MAS was rapidly deteriorating and additional efforts were needed to reverse the situation.

“But overall, yes, we do agree that we and especially MAS have a lot on our plate to ensure that we execute and communicate this well. The year 2012 will be critical,” he said.


This article appeared in The Edge Financial Daily, December 23, 2011.



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