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Awise: Deal Heaven in the Land Dr M. Made Famous
By Adrian Tan

13/1/2002 3:42 pm Sun

[Banyak 'deal' kerana banyak masalah sehingga banyak yang sudah sakit dan hampir tak bernyawa! Inilah wawasan yang asyik tidak menjadi nampaknya. - Editor]

Deal Heaven in the Land Dr M. Made Famous

By Adrian Tan, AsiaWise
10 Jan 2002

For regional investment bankers and brokers the place to be in 2002 is Kuala Lumpur. The diary is marked full of possible corporate finance activities despite a weak economy. And successful divestments need bullish buyers to part with their money at seller pleasing valuations.

Recently renationalized United Engineers (UE) plans to list toll road operator PLUS (penciled in for the second half of 2002) and this will be one of Malaysia's biggest ever IPOs. UE?s Renong should finally be selling rather than just talking about selling assets, i.e. its stakes in telecoms (Time Engr.), cement CIMA), banking (Commerce Asset), oil and gas (Crest Petroleum), hotels (Faber) and transport (Parkmay).

The plan is to reduce group debt (buyers willing) by about $4.3 billion to $3.7 billion and to transform Renong into a property company.

Others, too, have caught the degearing flu, to coin a phrase. Malaysian Resources (MRCB) wants to dispose of stakes in banking -- RHB -- and media -- New Straits Times Press and TV3; it also wants to sell its 70% stake in Sepang Power to Tenaga (listed government electricity utility) leaving the group focusing mainly on property and construction.

If all these sales go through, MRCB could raise up to $267 million in cash to help repay debts of over $328.9 million.

Multi Purpose Holdings Bhd.(MPHB) wants to remain in gaming (via a 30.4% stake in Magnum), stockbroking and insurance, and shipping; but dispose of interests in property (Banda Raya), banking (Alliance Bank) and power businesses (Sarawak Enterprises) to reduce debts of over $342 million.

Then there is the ongoing government-inspired restructuring of the banking sector. RHB group and Utama Banking Group are negotiating a merger of their banking businesses. Last week a Dow Jones Newswires report, quoting the usual unnamed banking and government sources, said that the deal between RHB and Utama had been abandoned. Rumor is that the banking businesses of RHB and Commerce will be merged.

This time in 2001, RHB group?s banking interests (third largest) were supposed to be in the process of being taken over by one of the smallest of the 10 anchor bank groups, Alliance Bank. Now patronless Alliance is expected to disappear.

In July there will be a pageant to decide which three of Malaysia's five mobile network operators should be granted 3G licenses. The winners will be Telekom, unlisted Maxis and DiGi.Com. Technology Resources Industries and Time dotCom are expected to merge with the favorites.

TRI meanwhile is restructuring among other things to avoid a $375 million Euroconvertible bond default, and a loan from the national asset management company. It also has to find acceptable shareholders for its restricted share offer.

Tenders for the construction of the $2.4 billion Bakun hydroelectric dam are to be called and construction companies are busily preparing to bid for contracts, and lining up financing and foreign partners.

Foreigners will play only bit parts except in the sales of stakes in Malaysian Airports and Malaysian Air System. Asset divestments will be to other Malaysian corporations or cash-rich government bodies like the state pension fund, though some of PLUS?s shares will have to be sold abroad.

And now that the controlling shareholders of MRCB and MPHB have changed, divestments may not be a priority if the banks decide to be patient. Last year, MRCB sold its 22.7% stake in RHB to Utama, a deal that is still to be completed.

Mid 2000, investment bankers and brokers were expecting Singapore to be deal heaven - what with government linked companies restructuring and banks unwinding their complex crossholding structures. Between a weak stock market and the unwillingness of sellers to accept buyers? valuations, deal flows have been a disappointment to over-staffed M&A and corporate finance teams. This may be repeated in KL.