UMW’s continuous pursuit of MBMR acquisition
KUALA LUMPUR: UMW Holdings Bhd’s (UMW) continuous pursuit of Med-Bumikar’s shares in MBM Resources Bhd (MBMR) even after the group’s offer has been rejected is an indication of UMW’s serious intention to go through with the buyout.
In a filing on Bursa Malaysia, UMW announced that the group had been notified by Med-Bumikar and its wholly-owned subsidiary, CSSB, that they have separately rejected the conditional offer made by UMW for the acquisition of their collective 50.07 per cent equity interest in MBMR.
“As the board is of the opinion that the conditional offer is reasonable, being at a premium to the traded share price, the Board intends to continue to engage Med-Bumikar, CSSB, their respective shareholders and key principals, being the brand owners of the distributorship marques, on the merits of the Proposed MBMR Acquisition for their further consideration,” the group said.
UMW added that accordingly, the group has notified Med-Bumikar and CSSB respectively in writing of its decision to extend the period for which the MBMR offer shall continue to be valid, from March 28 to April 30, 2018.
For the avoidance of doubt and as announced on March 9, 2018, UMW reaffirmed that the proposed MBMR acquisition and the proposed 10 per cent Perusahaan Otomobil Kedua Sdn Bhd (Perodua) acquisition from PNB Equity Resource Corporation Sdn Bhd are not conditional upon each other.
“Reading between the lines, we see UMW’s decision to extend the offer period as a serious intention to buyout Med-Bumikar and would not rule out some sort of revision to its original offer,” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) observed in a corporate update on UWW.
“However, assuming UMW sticks with a fully new sharefunded acquisition, we see only between four per cent to six per cent possible upside to its offer before the deal turns earnings dilutive.”
This was based on MIDF Research’s initial estimates on the deal’s earnings accretion, based on UMW’s planned financing strcuture.
The research arm noted that there is further possible upaside if UMW turns to partial debt financing to fund the deal.
“We would bear in mind that UMW had recently setup a RM2 billion perpetual sukuk program.”
MIDF Research recalled that when asked in a recent briefing, UMW’s management indicated the group does not intend to budge on its offer price, or at least this is what management is trying to sound out.
“As the dealmaker, UMW naturally will not put out the highest offer the first round neither would it divulge its intention to raise its offer.”
The research arm noted that having said that, UMW has an advantage.
This is given that UMW is an existing partner in Perodua, which would have the first right of refusal if a third party offers to buy out a stake in Perodua from any of the existing shareholders, MIDF Research highlighted.
Moreover, it noted that a third party acquisition is not entirely a straightforward process as existing Japanese partners in Perodua also has to agree if a new shareholder is to come into Perodua given the eventual business partnership.
Additionally, the research arm pointed out that there is actually a scarcity of buyers given that this involves a stake in the national carmaker which is of strategic importance to the nation; a potential buyer requires the necessary “political clout” and “financial clout”.
As the board is of the opinion that the conditional offer is reasonable, being at a premium to the traded share price, the Board intends to continue to engage Med-Bumikar, CSSB, their respective shareholders and key principals, being the brand owners of the distributorship marques, on the merits of the Proposed MBMR Acquisition for their further consideration. UMW