‘PROPOSED DEAL MAY NOT HAPPEN’

Analysts deem UMW’s offer price of RM2.56 per share as unattractive

UMW Holdings Bhd’s proposed takeover of MBM Resources Bhd — a substantial shareholder of Perusahaan Otomobil Kedua Sdn Bhd (Perodua) — is expected to fall through as the offer edges closer to its deadline at the end of this month.

Analysts said the deal might not happen due to the unattractive offer price as well as legal and structural complexities.

Affin Hwang Capital said the offer price of RM2.56 per share was unattractive as it valued car parts manufacturer MBM Resources at a 30 per cent discount to its net asset per share.

UMW had in March offered Med-Bumikar Mara Sdn Bhd RM2.56 per share for its 50.07 per cent stake in MBM Resources.

UMW extended the offer for six months until October 31 after Med-Bumikar’s board reportedly rejected the offer.

UMW’s pursuit of MBM Resources is aimed at ultimate control over second national carmaker Perodua, in which MBM Resources has a 22.58 per cent stake.

The six-month extension also applied to UMW’s RM417.5 million offer to buy 10 per cent of Perodua stake owned by PNB Equity Resource Sdn Bhd, a vehicle of UMW ma- jority shareholder Permodalan Nasional Bhd (PNB).

UMW already owns a 38 per cent stake in Perodua.

According to reports, the proposed takeover by UMW could result in the loss of Perodua’s two Japanese partners, Daihatsu Motor Co Ltd and Mitsui & Co Ltd, which provide key technical expertise and access to technology.

Affin Hwang noted that Med-Bumikar could also face legal obstacles from other Perodua shareholders.

It said the deal would likely fall through, given the more severe negative implications of the potential loss of the Japanese partners.

Affin Hwang also said the RM4.2 billion implied price tag valued Perodua at 9.5 times the 2017 price earnings ratio, which seemed low for the country’s leading car player.

Meanwhile, TA Securities Holdings Bhd analyst Abel Goon concurred that the offer price for MBM Resources was unattractive.

“The discount-to-book value is too large. If UMW can offer something better, it could be beneficial for both UMW and MBM Resources,” he said.

Affin Hwang, nevertheless, believes that the acquisition, if it materialises, will enhance UMW’s financial position.

“By increasing its stake in Perodua at a sensible price, (it will) strengthen its position in the Malaysian automotive market,” it added.