This article first appeared in The Edge Financial Daily on November 1, 2018
KUALA LUMPUR: UMW Holdings Bhd has dropped plans to acquire a 50.07% stake in motor vehicle group MBM Resources Bhd (MBMR) in a deal that would have seen it gain control of national carmaker Perusahaan Otomobil Kedua Sdn Bhd (Perodua).
As such, the resultant proposed mandatory general offer (MGO) is not going ahead.
In a statement yesterday, UMW said, it has also dropped plans to acquire a 10% stake in Perodua, as well a renounceable rights issue to raise up to RM1.1 billion.
“The board of directors has decided to allow the MBMR and Perodua offers to lapse and not to further extend the period. With the lapse of both the offers, the group will not be pursuing the proposed acquisitions, proposed MGO and proposed rights issue,” it added.
UMW president and group chief executive officer (CEO) Badrul Feisal Abdul Rahim said given the current business environment, it has recalibrated its corporate strategy in line with its ongoing transformation efforts and will focus on improving its financial performance.
“We would like to reaffirm our commitment to enhancing the performance of our car segment, expanding further into high-value manufacturing as well as increasing our product range and market presence for our equipment segment.
“We believe this will further strengthen our overall financial position, which will enable us to remain resilient in the increasingly challenging business environment,” he added.
Badrul Feisal said the group remains optimistic about exploring opportunities in the domestic market, as well as expanding its global footprint.
“We are confident the transformation efforts we have undertaken in the past few years will continue to benefit our shareholders and contribute positively to the overall growth of the Malaysian economy,” he added.
On March 9, UMW, which has a 38% equity interest in Perodua, announced that it was eyeing the 22.58% stake held by MBMR in an exercise that would involve taking the latter private.
UMW had also separately offered to buy a 10% stake in Perodua from Permodalan Nasional Bhd.
This entails the acquisition of the 50.07% stake in MBMR held by its majority shareholder Med-Bumikar Mara Sdn Bhd (49.5%) and its unit Central Shore Sdn Bhd (CSSB) (0.57%) for RM501.04 million, or RM2.56 per share, following which it would undertake a MGO for the remaining MBMR shares at RM2.56 per share.
The group will also buy a 10% stake in Perodua from PNB Equity Resource Corp Sdn Bhd for RM417.5 million. The purchase consideration was set to be settled by the issue of new UMW shares and RM117.5 million cash.
To finance the plan, UMW also proposed a rights issue to ask for fresh capital of up to RM1.1 billion from shareholders.
On March 13, UMW said it is proposing to undertake the proposed rights issue to primarily repay a bridging facility that it obtained to acquire the 50.07% stake in MBMR, and the resultant MGO for the remaining shares.
The plan, however, hit a snag when Med-Bumikar and CSSB turned down the conditional takeover offer on March 26.
Since the offer was made public in March, Daihatsu Motor Co Ltd — which has a 30% stake in Perodua — had written twice to express its displeasure and objection to UMW’s intention to gain majority control.
Analysts too have expressed their dissatisfaction over the proposed acquisition price, saying that it is lower than their existing target price for MBMR.
UMW shares closed six sen, or 1.28%, higher at RM4.75 yesterday, bringing a market capitalisation of RM5.55 billion. Since the announcement of the proposal in March, the stock has lost about a quarter of its value.
MBMR shares, meanwhile, ended the day down 2 sen, or 0.99%, at RM1.99, valuing it at RM777.87 million.