Who con­trols Me­dia Prima?

Up­com­ing EGM may shed some light on this

The Star Malaysia - StarBiz - - Companies & Strategies - By P. ARUNA aruna@thes­tar.com.my

ME­DIA Prima Bhd has al­ways been syn­ony­mous with the po­lit­i­cal party Umno, and with the fed­eral gov­ern­ment in Pu­tra­jaya. But a lot has changed over the past six months, since Umno, as part of the Barisan Na­sional gov­ern­ment, was top­pled dur­ing the May 9 gen­eral elec­tion.

While Umno still holds a stake – about 19% based on the me­dia com­pany’s last an­nual re­port – in Me­dia Prima, it is very likely that it no longer holds the reins of the com­pany. It no longer has the po­lit­i­cal clout, which means no more dish­ing out gov­ern­ment con­tracts and no more funds to pump into the com­pany.

Tak­ing cog­ni­sance of the changes, sources say the po­lit­i­cal party may exit Me­dia Prima if it gets a good deal.

To­wards this end, it is no­table that Tun Daim Zain­ud­din, who ran Me­dia Prima in the 1980s, re­cently de­nied that he is look­ing to take con­trol of the me­dia com­pany once again.

He was re­ported as say­ing that while Umno is look­ing to sell its stake in Me­dia Prima, he was not in­ter­ested in con­trol­ling a me­dia empire again.

How­ever, spec­u­la­tion is rife that par­ties close to Parti Pribumi Ber­satu Malaysia (Ber­satu) are keen on tak­ing con­trol of Me­dia Prima.

Ber­satu is the po­lit­i­cal party led by Tun Dr Ma­hathir Mo­hamad, mak­ing up part of the cur­rent rul­ing gov­ern­ment.

The ap­point­ment of Mustapha Kamil Mohd Janor as Me­dia Prima’s ex­ec­u­tive di­rec­tor, news and ed­i­to­rial, last month adds cre­dence to the spec­u­la­tion.

Mustapha left Me­dia Prima in May 2016 and be­came a staunch critic of 1Malaysia De­vel­op­ment Bhd (1MDB) as well as of the for­mer rul­ing gov­ern­ment’s tight con­trol of the me­dia group. With the com­pletely new po­lit­i­cal land­scape, it is need­less to say that there has been much spec­u­la­tion about who re­ally calls the shots in the me­dia com­pany to­day.

The group’s up­com­ing EGM, which will be held on Mon­day, Novem­ber 26, may shed some light on this.

The EGM is be­ing held to vote on the com­pany’s pro­posed sale of its New Straits Times Press (M) Bhd’s (NSTP) Balai Berita in Bangsar and the land where its print­ing plant is lo­cated in Shah Alam to PNB De­vel­op­ment Sdn Bhd for RM280mil, which was first an­nounced in Au­gust.

Tak­ing a look at the top five share­hold­ers of Me­dia Prima apart from Umno, there is the Em­ploy­ees Prov­i­dent Fund Board (EPF) and Amanah Sa­ham Bu­mi­put­era, through which Per­modalan Na­sional Bhd (PNB) owns its over 10% stake.

Kumpu­lan Wang Per­saraan (KWAP), mean­while, had a 2.07% stake as at Feb­ru­ary 28, 2018. An­other share­holder to watch is nom­i­nee com­pany Mor­gan Stan­ley & Co LLC, which has steadily been ac­cu­mu­lat­ing shares in Me­dia Prima over the past few months.

It is not known who is be­hind the com­pany and why it is choos­ing to ac­cu­mu­late shares in Me­dia Prima - a com­pany which has re­sorted to sell­ing its prized as­sets to stay afloat.

Ac­cord­ing to fil­ings to the stock ex­change, the fi­nan­cial ser­vices group based in the UK now has a 12.73% di­rect stake in the com­pany. EPF, mean­while, has a 12.029% di­rect stake.

Back to the EGM, all eyes will be on how share­hold­ers vote on the pro­posed as­set sales pro­posed by the man­age­ment.

PNB, be­ing an in­ter­ested party in the deal, will not be able to vote, which means all eyes will be on whether Umno, EPF and Mor­gan Stan­ley will back the pro­posal to sell the prized as­sets.

Zoom­ing in on the deal it­self, it could raise some ques­tions, such as why the as­sets are sold at an ag­gre­gate dis­count of 8.35% from the mar­ket value of of RM305.50mil, and why the com­pany opted to dis­pose the three as­sets as a “pack­age deal”.

Ac­cord­ing to the cir­cu­lar to share­hold­ers dated Novem­ber 2, 2018, sev­eral par­ties had ex­pressed in­ter­est for the prop­er­ties, but only two con­di­tional writ­ten of­fers were re­ceived - one for the Bangsar Prop­erty, and one for the Shah Alam prop­erty and Shah Alam va­cant land.

“Both con­di­tional writ­ten of­fers re­ceived were less at­trac­tive in com­par­i­son to the of­fer made by PNB De­vel­op­ment.

“Upon our eval­u­a­tion of the writ­ten of­fers re­ceived, we con­cluded that PNB De­vel­op­ment’s of­fer was the most suit­able of­fer in terms of pric­ing and other ma­te­rial terms (in­clud­ing the sale of the sale prop­er­ties as a pack­age, as op­posed to the dis­posal of in­di­vid­ual sale prop­er­ties),” the cir­cu­lar reads.

A fund man­ager say the as­sets, if sold in­di­vid­u­ally, could fetch a higher price for Me­dia Prima.

The com­pany, how­ever, cites “lower com­ple­tion risk” as its rea­son to sell the as­sets as a pack­age in­stead of dis­pos­ing it in­di­vid­u­ally. Look­ing at the break­down of the three as­sets, the Bangsar prop­erty is be­ing sold at a 9.37% dis­count, the Shah Alam prop­erty at a 2.37% dis­count and the Shah Alam land at a 23.26% dis­count.

The me­dia com­pany has said the pro­ceeds will be used to pay up debts and to re­in­force its ex­ist­ing busi­ness.

“The pro­posed sale will pro­vide an im­me­di­ate boost to our group’s cash flow and will al­low our group to re­duce our bor­row­ings level sig­nif­i­cantly, re­sult­ing in in­ter­est sav­ings and net cash in­flow.

“This fur­ther en­ables our group to al­lo­cate re­sources to re­in­force the ex­ist­ing busi­nesses and is ex­pected to con­trib­ute pos­i­tively to­wards our group’s over­all trans­for­ma­tion plans,” it says.

The other side of the deal is the ten­ancy agree­ment, which will en­able Me­dia Prima to con­tinue to op­er­ate its head­quar­ters in Bangsar and its print­ing plant in Shah Alam with­out dis­rup­tion for a min­i­mum pe­riod of six years.

The ten­ancy agree­ment is a con­di­tion un­der the sale pur­chase agree­ments en­tered into by the two par­ties.

Based on the cir­cu­lar to share­hold­ers, Me­dia Prima will be pay­ing the mar­ket price for the monthly rental rate - at RM2.20 per sqf for the Bangsar prop­erty and RM2 per sqf for the Shah Alam prop­erty.

The mar­ket rate is be­tween RM2 to RM2.30 and be­tween RM1.80 and RM2.10 re­spec­tively.

It raises the ques­tion as to whether this is re­ally a good deal for the me­dia com­pany as it is sell­ing the as­sets at a dis­count, yet still pay­ing mar­ket price for its monthly rental pay­ments.

For PNB on the other hand, this is clearly a good deal as it not only gets the prized as­sets at a dis­count, but also has a ready ten­ant for min­i­mum pe­riod of six years.

In­de­pen­dent ad­viser Mer­cury Se­cu­ri­ties Sdn Bhd deemed the pro­posed sale and lease­back ex­er­cise “fair and rea­son­able”.

“The pro­pos­als are fair and rea­son­able and are not detri­men­tal to the non-in­ter­ested share­hold­ers of Me­dia Prima, and the use of the net sale pro­ceeds from the pro­posed sale for re­pay­ment of the term loan is in the best in­ter­est of the share­hold­ers of Me­dia Prima,” it said in its in­de­pen­dent ad­vice let­ter, rec­om­mend­ing that share­hold­ers vote in favour of the pro­pos­als dur­ing the AGM.

Mov­ing for­ward, share­hold­ers will have to de­cide dur­ing the up­com­ing EGM, whether the as­set sales are the right way to go for the com­pany.

The com­pany is now op­er­at­ing in a new po­lit­i­cal land­scape, and a new level play­ing field, with­out the steady flow of gov­ern­ment con­tracts it used to en­joy.

In its most re­cent quar­ter, Me­dia Prima recorded a net profit of RM31.95mil, up from a net loss of RM132.9mil dur­ing the same quar­ter of the pre­vi­ous year.

The me­dia in­dus­try is un­der­go­ing a tough time, and Me­dia Prima’s op­er­a­tions have been af­fected, along with other big play­ers.

These con­di­tions make Me­dia Prima a prime takeover tar­get – it op­er­ates in a tough in­dus­try and the ma­jor share­holder only has a 19% block. If in­deed there is a se­ri­ous party look­ing to take over the reins from Umno, some in­di­ca­tions should show up at the up­com­ing EGM, along with some clar­ity on who calls the shots in Me­dia Prima at present.

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