UMW, MBM and Pero­dua dead­lock re­solved?

Med-Bu­mikar Mara’s EGM end of this month may re­sult in share­hold­ers ac­cept­ing stake buy­out of­fer

The Star Malaysia - StarBiz - - Front Page -

ONE sig­nif­i­cant party in the UMW Hold­ings Bhd-MBM Re­sources BhdPero­dua saga is gov­ern­ment agency Ma­jlis Amanah Rakyat (Mara).

How­ever, as the sin­gle largest share­holder in Med-Bu­mikar Mara Sdn Bhd – the pri­vate ve­hi­cle that con­trols listed MBM – it has re­mained si­lent on UWM’s over­tures to­wards Perusa­haan Oto­mo­bil Ke­dua Sdn Bhd (Pero­dua).

But now, Mara has stepped into the fray.

Ac­cord­ing to sources, it has prompted for an EGM of MedBu­mikar Mara to be held at the end of this month for its share­hold­ers to con­sider the of­fer by UMW to buy its 50.07% stake in MBM. The jewel in MBM is its 20% in Pero­dua.

The saga in­volves a com­plex struc­ture of com­pa­nies.

How­ever, the crux of the cor­po­rate ex­er­cise is for con­glom­er­ate UMW to in­crease its stake in Pero­dua.

Re­ports have in­di­cated that by rais­ing its stake in Pero­dua, UMW would raise the prospects of the loss-mak­ing con­glom­er­ate’s earn­ings.

Pero­dua is one of the two home­bred auto man­u­fac­tur­ers and it is the mar­ket leader with a 36% share based on sales.

Based on its last au­dited re­sults (2016), Pero­dua made a rev­enue of RM9­bil and a net profit of RM464mil, re­sult­ing in a fair net mar­gin of 5%.

It sold 205,000 cars last year on a lean line-up of four mod­els, and is set to re­lease a game-chang­ing sports util­ity ve­hi­cle (SUV) by early-2019.

UMW cur­rently owns a 38% stake in Pero­dua. Its par­ent com­pany, Per­modalan Na­sional Bhd (PNB), has 10% in Pero­dua, a stake which UMW is plan­ning to also buy. Com­bined with gain­ing con­trol of MBM, UMW would end up with close to 70.6% in Pero­dua.

So, the key ques­tion is, will Mara get the sup­port of other share­hold­ers in Med-Bu­mikar Mara to sell their com­pany’s stake in MBM to UMW?

UMW’s bid to in­crease its stake in Pero­dua started on March 9 when it made an of­fer to Med-Bu­mikar Mara to ac­quire its con­trol­ling 50.07% stake in MBM for RM501mil, or RM2.56 per share.

Be­sides its di­rect 20% in­ter­est in Pero­dua, MBM con­trols 5% more via 51%-sub­sidiary Dai­hatsu Malaysia Sdn Bhd.

Sep­a­rately, UMW has also pro­posed to buy PNB Eq­uity Re­sources Corp Sdn Bhd’s 10% in­ter­est in Pero­dua at RM417.5mil, or RM29.80 apiece.

How­ever, Med-Bu­mikar Mara’s board of di­rec­tors threw out the pro­posal. On March 26, MBM dis­closed that it was in­formed by Med-Bu­mikar Mara that the board of di­rec­tors of Med-Bu­mikar Mara had de­lib­er­ated and de­cided to re­ject the of­fer from UMW.

The lat­ter has since ex­tended the ac­cep­tance pe­riod un­til April 30. In ear­lier re­ports, Med-Bu­mikar Mara’s ex­ec­u­tive chair­man Datuk Ab­dul Rahim Ab­dul Halim (who is also MBM chair­man) said that UMW’s of­fer for Med-Bu­mikar Mara’s stake was fair but not rea­son­able.

MBM’s net tan­gi­ble as­sets stood at RM3.68 per share, while the of­fer val­ued it at RM2.56.

Ab­dul Rahim also said the cor­po­rate ex­er­cise was not so straight­for­ward, given that there are con­di­tions prece­dent which need the con­sent of some other share­hold­ers, in­clud­ing Ja­panese part­ner Dai­hatsu.

This “sup­ple­men­tary agree­ment” was en­tered by Med-Bu­mikar Mara at the time the en­tity trans­ferred to MBM, which es­sen­tially states that Med-Bu­mikar Mara and MBM should be re­lated com­pa­nies.

Ac­cord­ing to him, MBM’s Ja­panese part­ners also pre­fer the cur­rent sta­tus quo in terms of share­hold­ing.

Above this, ex­ist­ing share­hold­ers in Pero­dua have the first right of re­fusal in the event an ex­ist­ing share­holder in­tends to sell a stake.

But many reckon that there are not many po­ten­tial suit­ors for Pero­dua, con­sid­er­ing the Dai­hatsu/Mit­sui fac­tor. Mean­while, in an email re­ply to

StarBizWeek, Mara says: “We firmly be­lieve that all de­lib­er­a­tions must fol­low the nec­es­sary pro­cesses or be made via ap­pro­pri­ate fo­rums such as dur­ing the EGM which is to be held on April 30, 2018.

“Suf­fice to say that any de­ci­sion by Mara per­tain­ing to this mat­ter is strictly guided by our mis­sion to spear­head the fields of en­trepreneur­ship, ed­u­ca­tion and to in­crease eq­uity in­vest­ment for the ben­e­fit of our stake­hold­ers.

“Any de­ci­sion to be made by Mara in the pro­posed sale of the stake in MBM would be based not only on the po­ten­tial strate­gic ben­e­fits it would bring to Mara as an en­tity, but also to the na­tion.

“The im­pact of this deal would need to be con­sis­tent with the na­tional long-term vi­sion in strength­en­ing the au­to­mo­tive in­dus­try, par­tic­u­larly in re­spond­ing to the many chal­lenges brought about by fac­tors such as rapid global tech­no­log­i­cal and in­dus­trial de­vel­op­ment in the in­dus­try.”

Mara’s state­ment gives a tacit in­di­ca­tion that it is in favour of UMW gain­ing con­trol of Pero­dua, con­sid­er­ing the con­sol­i­da­tion in the au­to­mo­tive in­dus­try.

Sources say that Mara feels a con­sol­i­da­tion move will ben­e­fit both Pero­dua and UMW, which as­sem­bles/dis­trib­utes the Toy­ota brand of ve­hi­cles.

Dai­hatsu is, mean­while, wholly owned by Toy­ota Mo­tor Corp of Ja­pan. The chang­ing in­dus­try dy­nam­ics, they point out, in­clude in par­tic­u­lar the en­try of China’s Zhe­jiang Geely Hold­ing Group Co Ltd into the do­mes­tic mar­ket fol­low­ing its part­ner­ship with Pro­ton Hold­ings Bhd.

No­tably, just this week, Pro­ton an­nounced that it is set to launch a new SUV, the first prod­uct jointly de­vel­oped with Geely, and that would be the first premium C-seg­ment SUV pro­duced by a Malaysian au­to­mo­tive brand.

How will Med-Bu­mikar Mara share­hold­ers vote?

With the EGM be­ing called now, all share­hold­ers of Med-Bu­mikar Mara will get to vote on this deal.

The ques­tion is, what is the per­cent­age of share­hold­ers who will agree to the UWM of­fer?

Sources in­di­cate that Mara is likely to have the sup­port of two of the fam­i­lies in the pri­vately-held en­tity.

They are be­lieved to be the Looi and Wong fam­i­lies (see share­hold­ing chart).

“If it is in­deed true that Mara has the sup­port of the two fam­i­lies, it could swing Med-Bu­mikar Mara to vote in favour of ac­cept­ing the deal with UMW,” say sources.

MIDF Re­search, ear­lier this week, wrote that based on the chain of events at MBM in re­cent years, it noted that Looi Kok Loon and Wong Fay Lee (of two dif­fer­ent fam­i­lies in Med-Bu­mikar Mara) had both left their po­si­tions in MBM within the same year in 2017.

Looi, for­merly MBM’s man­ag­ing di­rec­tor, left early last year.

Mara on its own can’t sway in any de­ci­sion with its 29.18% stake.

The six other fam­i­lies hold be­tween 11% and 13% each.

With the sup­port of at least two fam­i­lies, there ap­pears to be a strong case to push the deal at the EGM.

This could mean that the dead­lock in the UMW-MBM-Pero­dua saga could likely be bro­ken.

The next two weeks will de­ter­mine if UMW will see its plan to in­crease its stake in Pero­dua pan out.

Shares in both UMW and MBM closed higher yes­ter­day af­ter slip­ping ear­lier this week.

UMW rose six sen to RM6.17, while MBM was up one sen to RM2.45.

By GURMEET KAUR gurmeet@thes­tar.com.my

Jewel in the crown: The highly-pop­u­lar new Myvi model. Pero­dua is one of the two home-bred auto man­u­fac­tur­ers and it is the mar­ket leader with a 36% share based on sales. In­creas­ing stake: UMW ow plan­ning to also buy. Combi

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