M&A talk drives up Proton stocks

Proton’s suitors are said to include conglomerates DRB-HICOM, Naza Group and even Sime Darby.


Kuala Lumpur: Shares of carmaker Proton Holdings Bhd surged yesterday on market speculation of a merger and acquisition (M&A) activity looming closer.

Talk of an impending takeover of, or stake sale in Proton has been making its rounds in the last three weeks, pushing its share price up on a volatile uptrend.

A deal could happen next week, a local analyst told Business Times, citing sources. Proton’s suitors are said to include conglomerates DRB-HICOM, Naza Group and even Sime Darby Bhd. Analysts seemed to find a stake sale to DRB-HICOM the most compelling scenario.

Proton’s share price gained 15.4 per cent (or 51 sen) to RM3.61 on heavy volume. It was the day’s third biggest gainer. Bloomberg data shows that of the 13 analysts that track the stock, none had a “buy” call on it.

Research house UOB Kay Hian says Proton is “on its radar” now seeing as it is a beneficiary of M&As of government-linked companies (GLCs).

Earlier this week, it raised its call on the stock to a “hold” from “sell”, and its target by 50 sen to RM3.05. “We expect further speculation of an M&A to support Proton’s share price. Industry sources indicated that DRB-HICOM has the highest
chance of acquiring a 30 per cent stake in Proton at a very steep price of RM8.00 a share,” it said on Wednesday.

This would mean DRB-HICOM would have to fork out RM1.3 billion to buy Proton. Proton’s biggest shareholder Khazanah Nasional Bhd,which owns a 42.7 per cent stake, has been said
to be looking to sell.

"Whoever acquires Proton - DRB-HICOM is the most compelling candidate thus far - may be considering disposing of Lotus Group and also negotiating with multinational car producers looking to diversify some production from Thailand, given Proton's ample industrial landbank," UOB Kay Hian said.

It estimated that every RM100 million Proton raised from disposing the loss-making Lotus Group could add 20 sen a share to its revised net asset value.

DRB-HICOM has for many years been reported to be interested in Proton. It used to own more than 27 per cent of Proton before selling that stake to Petroliam Nasional Bhd (Petronas) in 2000.

Proton's other shareholders now, besides Khazanah, are the Employees Provident Fund (10.8 per cent) and Petronas (7.8 per cent).

hopefully one day proton realizes it has to up its ante