Proton exercise picks up pace

KUALA LUMPUR: Proton Holdings Bhd continued to attract a frenzy of investor interest amid speculation that a corporate exercise is in the offing, with DRB-Hicom Bhd emerging as the likely suitor. The share price shot up by another 89 sen yesterday to close at RM4.50.

DRB-Hicom also saw a significant rise in its share price, gaining 20 sen to end trading at RM2.20, its highest since early August this year. Over the weekend, Proton chairman Datuk Mohd Nadzmi Mohd Salleh confirmed there is a corporate exercise in the offing at Proton but declined to elaborate.

Tan Sri Syed Mokhtar Al-Bukhary, who controls DRB-Hicom, is believed to be in negotiations with Maybank Investment Bank (Maybank IB) to craft a deal in his bid to take control of national automaker Proton, sources said.

“Maybank IB is to assist and handle the required merchant banking work as well as possible funding for its proposal to take over the automaker,” said a source. Maybank IB officials could not be reached for comment.

Maybank IB’s appointment should not come as a surprise as the investment bank has been doing the lion’s share of Syed Mokhtar’s work since one of his first major corporate exercises, the injection of the Port of Tanjong Pelepas (PTP) into MMC Corp Bhd in 2005.

Based on the share price movement, the market seems to have accepted that DRB-Hicom is to be Syed Mokhtar’s vehicle to amalgamate his interests in the automotive industry. But the company’s top officials have denied any interest in Proton.
Syed Mokhtar has a 56% interest in DRB-Hicom.

Syed Mokhtar has a 56% interest in DRB-Hicom Bhd which has an assembly plant in Pekan, Pahang.

Yesterday, Proton and DRB-Hicom were among the major gainers on Bursa Malaysia. Proton chalked up another 89 sen to close at RM4.50 with more than 20 million shares changing hands. In intra-day trading the automaker’s stock hit a high of RM4.60. DRB-Hicom, meanwhile, gained 20 sen to end trading at RM2.20, its highest since early August this year.

Other parties who are understood to be interested in Proton include the Naza Group although senior officials of the automotive group deny any interest in Proton.

Apart from these two local automotive giants, the management of Proton led by Nadzmi is also keen on a management buyout of Khazanah’s stake.

“However, the management does not have the financial muscle,” said a source.

Khazanah Nasional Bhd, which controls 42.7% of Proton is leading the charge in the impending corporate exercise in Proton. According to a report in The Edge weekly, the sovereign wealth fund is likely to call for bids for its interest in Proton, which is a non-core asset. This is similar to what it did with Pos Malaysia Bhd and Time dotCom Bhd.

If there are no parties prepared to take the entire 42.7% block, Khazanah may opt to sell a stake of less than 33%, so as to allow the bidder to avoid making a mandatory general offer.

While DRB-Hicom has several businesses including defence, property development, hotels, engineering and banking to name a few, its auto business is its mainstay.

At its plant in Pekan, it assembles Volkswagen cars, after signing a collaboration and licence agreement last year.

Ironically, a few years ago Volkswagen AG had attempted to take control of Proton, but talks with Khazanah fell through at the 11th hour after prolonged negotiations. Many speculate that Volkswagen’s expertise could be brought in this time around via DRB-Hicom.

For its six months ended September 2011, DRB-Hicom posted a net profit of RM195.34 million on the back of RM3.06 billion in revenue. Earnings per share (EPS) for the six-month period amounted to 10.10 sen.

Proton registered a net profit of RM20.11 million on RM4.50 billion in revenue, for its six months ended September this year. For the six months, Proton’s EPS was 3.7 sen, while its net assets per share stood at RM9.81.