KUALA LUMPUR: DRB-Hicom Bhd snapped up 39.93 million shares in automaker Proton Holdings Bhd or almost 70% of all the automaker’s shares that were traded yesterday, ahead of its acquisition of Khazanah Nasional Bhd’s 42.72% block in the company.
The shares amounted to a 7.27% stake in Proton and were acquired between RM5.40 and RM5.47 per share, setting DRB-Hicom back by about RM218 million.
Proton was the most active counter on the local bourse yesterday, with 57.45 million shares changing hands.
DRB-Hicom’s open market purchases came right after the opening bell, when Proton’s shares resumed trading. Trading in the stock was suspended on Monday pending DRB-Hicom’s announcement of its planned acquisition. DRB announced its intent to acquire the 42.72% stake in Proton at RM5.50 per share or for RM1.29 billion.
The sale will trigger a mandatory general offer (MGO) from DRB-Hicom for all the outstanding Proton shares not under its control. Discounting the 7.27% stake it acquired yesterday, the MGO may cost DRB-Hicom up to RM2.8 billion.
Following the announcement of the takeover, the national carmaker surged 4.44% yesterday to RM5.41 from RM5.18 last Friday.
It is not clear if DRB-Hicom’s plan is to delist the automaker.
In the first scenario where DRB-Hicom acquired more than 75% of the issued Proton shares, which is above the minimum shareholding spread, this will leave minority shareholders in a bind.
On the other hand, DRB-Hicom may not delist Proton, as it still needs access to the capital markets.
Even if DRB-Hicom acquires more than 75% of the issued shares, it can still apply to maintain the listing status of the company by undertaking corporate exercises like private placements to maintain the public shareholding of more than 25%.
However, HwangDBS Vickers Research noted that Proton’s near-term prospects will be unfavourable.
“The synergies with DRB-Hicom will only be realised years down the road and Proton’s share price could fall below the GO price,” said HwangDBS.
An analyst noted that Proton’s share price is only sustained at the current level because of the MGO and once that is completed, the price will likely fall again.
Investors may be compelled to hold on to Proton shares for exposure to the earnings upside as DRB-Hicom attempts to turn the ailing automaker around. In that situation, they should still cash out at RM5.50 and buy back at a lower price.
Petroliam National Bhd (Petronas) and the Employees Provident Fund (EPF) are the two largest shareholders of Proton after Khazanah with 7.8% and 7.5% respectively.
If Petronas and the EPF do not subscribe to the MGO, this would shave off approximately RM460 million from DRB-Hicom’s acquisition costs.
However, the EPF has been paring down its stake from September last year when it owned some 59.2 million shares or 10.78% equity interest in the company.
Former premier Tun Dr Mahathir Mohamad is adviser to both Petronas and Proton.
DRB-Hicom’s acquisition comes with conditions, with no retrenchments for a one-year time frame and a two-year moratorium on sale of Proton shares.
According to a CIMB report, DRB-Hicom will need to secure Khazanah’s approval to sell any of the 42.72% stake or profits from any sale above RM5.50 will also go to Khazanah, thus preventing DRB-Hicom from flipping shares for an extraordinary gain.
However, CIMB noted that DRB-Hicom is likely to relist some of the stake after two years to service the debt for the acquisition.
DRB-Hicom slipped seven sen yesterday to RM2.10, with 12.81 million shares changing hands.
This article appeared in The Edge Financial Daily, January 18, 2012.
The shares amounted to a 7.27% stake in Proton and were acquired between RM5.40 and RM5.47 per share, setting DRB-Hicom back by about RM218 million.
Proton was the most active counter on the local bourse yesterday, with 57.45 million shares changing hands.
DRB-Hicom’s open market purchases came right after the opening bell, when Proton’s shares resumed trading. Trading in the stock was suspended on Monday pending DRB-Hicom’s announcement of its planned acquisition. DRB announced its intent to acquire the 42.72% stake in Proton at RM5.50 per share or for RM1.29 billion.
The sale will trigger a mandatory general offer (MGO) from DRB-Hicom for all the outstanding Proton shares not under its control. Discounting the 7.27% stake it acquired yesterday, the MGO may cost DRB-Hicom up to RM2.8 billion.
Following the announcement of the takeover, the national carmaker surged 4.44% yesterday to RM5.41 from RM5.18 last Friday.
It is not clear if DRB-Hicom’s plan is to delist the automaker.
In the first scenario where DRB-Hicom acquired more than 75% of the issued Proton shares, which is above the minimum shareholding spread, this will leave minority shareholders in a bind.
On the other hand, DRB-Hicom may not delist Proton, as it still needs access to the capital markets.
Even if DRB-Hicom acquires more than 75% of the issued shares, it can still apply to maintain the listing status of the company by undertaking corporate exercises like private placements to maintain the public shareholding of more than 25%.
However, HwangDBS Vickers Research noted that Proton’s near-term prospects will be unfavourable.
“The synergies with DRB-Hicom will only be realised years down the road and Proton’s share price could fall below the GO price,” said HwangDBS.
An analyst noted that Proton’s share price is only sustained at the current level because of the MGO and once that is completed, the price will likely fall again.
Investors may be compelled to hold on to Proton shares for exposure to the earnings upside as DRB-Hicom attempts to turn the ailing automaker around. In that situation, they should still cash out at RM5.50 and buy back at a lower price.
Petroliam National Bhd (Petronas) and the Employees Provident Fund (EPF) are the two largest shareholders of Proton after Khazanah with 7.8% and 7.5% respectively.
If Petronas and the EPF do not subscribe to the MGO, this would shave off approximately RM460 million from DRB-Hicom’s acquisition costs.
However, the EPF has been paring down its stake from September last year when it owned some 59.2 million shares or 10.78% equity interest in the company.
Former premier Tun Dr Mahathir Mohamad is adviser to both Petronas and Proton.
DRB-Hicom’s acquisition comes with conditions, with no retrenchments for a one-year time frame and a two-year moratorium on sale of Proton shares.
According to a CIMB report, DRB-Hicom will need to secure Khazanah’s approval to sell any of the 42.72% stake or profits from any sale above RM5.50 will also go to Khazanah, thus preventing DRB-Hicom from flipping shares for an extraordinary gain.
However, CIMB noted that DRB-Hicom is likely to relist some of the stake after two years to service the debt for the acquisition.
DRB-Hicom slipped seven sen yesterday to RM2.10, with 12.81 million shares changing hands.
This article appeared in The Edge Financial Daily, January 18, 2012.
