2023 - NEWSMAKERS: A YEAR OF M&As

TheEdge Mon, Jan 08, 2024 12:40pm - 3 months View Original


This article first appeared in The Edge Malaysia Weekly on December 25, 2023 - December 31, 2023

The year saw a number of major deals announced, with some yet to be completed. Others did not make it to the finish line, having been scuttled midway.

 

 

 

Portfolio diversification while maintaining control

It was something that everyone saw coming, but few believed would happen. But once Permodalan Nasional Bhd decided to merge Sime Darby Bhd and UMW Holdings Bhd in a RM3.57 billion deal, the die was cast. PNB would retain control, Sime Darby would be able to plug its gaps in the automotive business and the shareholders of UMW would get fair returns.

 

Ahmad Zulqarnain Onn

President and group CEO of Permodalan Nasional Bhd

 

Transforming Malaysia’s largest asset management company is no easy task, but Ahmad Zulqarnain Onn has been at it since taking on the top job at the national behemoth in July 2020. Following in the footsteps of his predecessors, he has been steadfast in diversifying the fund’s portfolio. However, to do that, he must first ensure that the domestic portfolio is resilient, which is one of the reasons for the consolidation of its stakes in Bursa Malaysia-listed companies.

Hence, the acquisition of UMW Holdings Bhd by Sime Darby Bhd — both are in the same industries, albeit in different segments. With the acquisition of UMW, Sime Darby is able to plug the gaps in its automotive business, and strengthen its position in the heavy machinery segment.

In return, Permodalan Nasional Bhd gets RM3.57 billion cash from its investee company Sime Darby, which could go a long way for the asset management company to diversify its portfolio. At the same time, PNB gets to hold on to its investments in UMW through Sime Darby.

Now that it has started the process of consolidating its investments in the automotive and industrial machinery businesses, all eyes will be on what is next for PNB. Its holdings of property assets will be one area investors will focus on.

PNB is one of the largest real estate owners in Malaysia, both through its investments in property development groups S P Setia Bhd and Sime Darby Property Bhd as well as in standalone properties such as Menara PNB and Perdana Kuala Lumpur City Centre, along with 400 units of industrial assets.

With PNB moving to Merdeka 118 next year, the group will have to monetise its old headquarters at Menara PNB. It will be interesting to see what Ahmad Zulqarnain and his team will do with PNB’s property portfolio, starting with the almost 40-year-old office building in Jalan Tun Razak, KL. — By Kamarul Azhar

 

Datuk Jeffri Salim Davidson

Group CEO of Sime Darby Bhd

 

Sime Darby Bhd’s acquisition of UMW Holdings Bhd has been likened to the awakening of a giant from its slumber. Although it is widely assumed that the acquisition was pushed on Sime Darby by its largest shareholder Permodalan Nasional Bhd, those close to the group say this is not the case. What is certain, though, is the synergies that would arise from the deal. How will Sime Darby CEO Datuk Jeffri Salim Davidson draw on these synergies to grow the conglomerate?

With the acquisition of UMW, Sime Darby will have access to Malaysia’s largest carmaker, Perusahaan Otomobil Kedua Sdn Bhd (Perodua). With Perodua under its stable, Sime Darby will be able to balance its huge exposure to China, which has experienced a slowdown in recent years.

However, this also means that Sime Darby will be working together with Perodua’s technology partner and shareholder Daihatsu Motor Co Ltd. It will be interesting to see how Sime Darby’s expertise in regional distribution will be leveraged to grow Perodua’s exports.

The complexity of Perodua’s shareholding structure means that it would not be business as usual for Jeffri post-acquisition. Besides Daihatsu, Mitsui & Co is another Japanese party that has stakes in Perodua, as well as MBM Resources Bhd.

Already, Sime Darby has made it clear that it wants to focus on the automotive and industrial machinery businesses. The group has agreed to sell its healthcare business through Ramsay Sime Darby Health Care Sdn Bhd to Columbia Asia Healthcare Sdn Bhd for RM5.7 billion cash.

How Jeffri will ensure that all these changes to the group’s structure and business lead to better earnings for Sime Darby will be one to watch out for in 2024 and beyond. — By Kamarul Azhar

 

The bank merger that finally happened

 

Rafe Haneef

Group CEO of Malaysia Building Society Bhd

 

Datuk Nor Azam M Taib

CEO of MBSB Bank Bhd

 

The merger of Malaysia Building Society Bhd (MBSB) and Malaysian Industrial Development Finance Bhd (MIDF), completed on Oct 2 this year, put state-owned fund management giants Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF) on opposite sides of the negotiating table.

MBSB was 65.87% owned by the EPF, while MIDF — the smaller of the two entities — was wholly owned by PNB. Prior to the merger, Datuk Nor Azam M Taib was the CEO of MBSB, while Datuk Charon Wardini Mokhzani was the group managing director of MIDF.

In April 2022, Bank Negara Malaysia gave the two parties the green light to enter into discussions and the merger process dragged on for a good 1½ years before it was finally completed. During that period, MBSB’s then chairman Tan Sri Azlan Zainol, who was said to be a key figure driving the merger, passed away on Jan 12.

The process culminated with MBSB acquiring MIDF in a RM1.01 billion all-share deal. The EPF’s stake in the combined entity was diluted to 57.45%, while PNB became a substantial shareholder with a 12.78% stake.

In the months leading up to the deal’s completion, there was much tongue-wagging as to whether it would be Nor Azam or industry veteran Charon who would lead the merged entity.

As it turned out, the role went to an external candidate. Rafe Haneef, who was CIMB Group Holdings Bhd’s CEO of group transaction banking, was appointed MBSB group CEO effective July 1, while Nor Azam was named CEO of the banking unit, MBSB Bank Bhd. Charon left MIDF.

All eyes are on Rafe and Nor Azam to see how soon they can reap the synergies of the merger and make a stronger mark for the MBSB group amid the increasingly competitive and tough operating environment for banks. — By Adeline Paul Raj

 

 

Datuk Amirul Feisal Wan Zahir

Managing director of Khazanah Nasional Bhd

 

Datuk Amirul Feisal Wan Zahir joined the sovereign wealth fund (SWF) in mid-July 2021, at a time when the finances of its shareholder the government of Malaysia came under great strain.

Under Amirul, Khazanah Nasional Bhd has been paring down its interests — selling small blocks of shares — in a number of companies, namely Tenaga Nasional Bhd, CIMB Group Holdings Bhd and TIME dotCom Bhd, raising some RM2.4 billion. Many of the Khazanah-linked companies have also been paying out dividends, shoring up its parent’s financials.

The SWF is currently in the process of divesting certain choice assets such as Cement Industries of Malaysia Bhd (CIMA), which is held under its flagship, wholly owned UEM Group Bhd.

A look at Khazanah’s financials as at end-2022 shows its cash and cash equivalent stood at RM12.33 billion, up 2.86% from RM11.99 billion a year earlier. It had paid the federal government RM1 billion in dividends in 2023 and is expected to fork out another RM1 billion for its obligation to Putrajaya for 2024. Both payouts are double its RM500 million dividend payout in 2022.

Meanwhile, Khazanah’s long- and short-term liabilities as at end-December 2022 stood at RM42.43 billion and RM15.97 billion respectively. Of the short-term liabilities, almost the entire amount were borrowings and bonds.

While it has been disposing of some of its investments, Khazanah still has a role to play in supporting local start-ups, namely through its newly launched Future Malaysia Programme, an initiative under its RM6 billion Dana Impak mandate.

Considering appointments to the helm of government-linked investment funds are usually for three-year stints, Amirul’s contract should be up for renewal mid-2024.

The key question is, will his contract at Khazanah be extended, and, if not, who will take over the reins of the sovereign wealth fund? — By Jose Barrock

 

Brahmal Vasudevan

Founder and CEO of Creador Sdn Bhd

 

Brahmal Vasudevan was in the spotlight this year after his private equity firm exited its investment in MR DIY Group (M) Bhd and for acquiring the Caring Pharmacy chain.

In March, Creador Sdn Bhd divested its entire 4.92% stake in MR DIY via a private placement exercise for a total of RM664 million or RM1.43 per share, of which 360 million shares were acquired by institutional investors for RM514 million and the remaining 105 million shares were taken up by the management of Creador and MR DIY for RM150 million.

While Creador sold its stake in MR DIY due to the end of its fund life in August 2023, Brahmal in his personal capacity picked up 14.92 million shares, or a 0.16% stake, via Japamala Ltd for RM21.34 million, bringing his interest to 0.232%. In April, Brahmal exited MR DIY’s board of directors.

Creador, which invested in home improvement retailer MR DIY in 2016, was instrumental in assisting the company with its local and overseas expansion. On its Bursa Malaysia debut on Oct 26, 2020, MR DIY was valued at RM10 billion and raised RM1.5 billion from the initial public offering. Following its listing, the retailer diversified to include MR TOY and MR DOLLAR.

In July, Creador’s BIG Pharmacy Healthcare Sdn Bhd said it was buying Caring Pharmacy Group Bhd for RM850 million from 7-Eleven Malaysia Holdings (75%) and Motivasi Optima Sdn Bhd (25%), creating a chain with more than 400 outlets and RM2.3 billion in annual revenue.

Two months later, 7-Eleven said it and BIG Pharmacy agreed to complete their part of the deal at a higher price, with the former’s 75% stake in Caring Pharmacy sold for RM675 million instead of the RM637.5 million agreed upon earlier. Motivasi Optima would also dispose of its 25% stake in Caring Pharmacy to BIG Pharmacy. However, the final price is not known.

Creador plans to list the merged entity in 2026.

After the successful listing and exit from MR DIY, it will be interesting to see what value Brahmal — who is said to have a clear exit strategy before making any investment — will create for the pharmacy chain and what his next investment will be. — By Vasantha Ganesan

 

Loi Tuan Ee

Co-founder and managing director of Farm Fresh Bhd

 

Farm Fresh Bhd, initially starting with 60 Holstein Jersey cows imported from Australia on its farm in Johor, made an impressive breakthrough in the local dairy industry in 2010.

Spearheaded by co-founder and managing director Loi Tuan Ee, Farm Fresh — formerly known as Holstein Milk Co Sdn Bhd — has defied industry norms to become a local champion in the ready-to-drink (RTD) milk segment despite the long-standing dominance of multinational brands.

Loi is the single largest shareholder of Farm Fresh, with a 43% stake. He and his siblings are ranked 46th on Forbes’ “Malaysia’s 50 Richest” list, with a net worth of US$350 million (about RM1.636 billion) in 2023.

Loi, a farmer turned entrepreneur who grew up in a small town in Perak, now envisions a bold chapter for Farm Fresh.

Having established itself as one of the largest and fastest-growing dairy producers in Malaysia, the 60-year-old “milkman” believes it is time for Farm Fresh to take on the big boys again. This time, in the ice cream and children’s milk markets.

Notably, Farm Fresh had in May acquired a 65% stake in ice cream chain store operator The Inside Scoop Sdn Bhd for RM83.9 million, turning its husband-and-wife founders Edmund Tan Jun Hua and Lim Shiew Li into multi-millionaires.

Following the cash-and-stock deal, Tan is currently among the 30 largest shareholders of Farm Fresh. In May, Loi told The Edge in an interview that his idea is to build a local, home-grown brand in the consumer-packaged goods (CPG) ice cream market, taking on the multinational giants — just like what Farm Fresh did in the chilled RTD milk market.

Following the encouraging response to its Farm Fresh Grow UHT Formulated Milk, the group had in November launched Farm Fresh Grow in powder format, which is more affordable than the liquid version. However, news of supply constraints in the Australian milk industry saw shares in Farm Fresh fall to its all-time low of slightly above RM1 in July. Since then, the counter has rebounded by 26% to close at RM1.34 on Dec 7, supported by its stronger earnings on lower dairy raw-materials costs. — By Liew Jia Teng

 

Datuk Cheah See Yeong

President of Golden Scoop Sdn Bhd

 

Golden Scoop Sdn Bhd, the master franchisee of US ice cream chain Baskin-Robbins in Malaysia and Singapore, recently picked up a sweet deal when it bought a controlling stake in Apollo Food Holdings Bhd — a Johor-based chocolate confectionery that has been listed on Bursa Malaysia since 2000.

Apollo Food announced to Bursa Malaysia that, on Dec 18, Golden Scoop president Datuk Cheah See Yeong had acquired the 51.31% stake from its controlling shareholder, Keynote Capital Sdn Bhd, via Scoop Capital Sdn Bhd for RM238.1 million, or RM5.80 per share. Keynote Capital is the private investment vehicle of Apollo executive chairman Liang Chiang Heng and his younger brother Liang Kim Poh, the group’s managing director. It was reported that with the two brothers advancing in age, coupled with the lack of a clear succession plan, they were interested in exiting the business.

Meanwhile, Cheah holds a 90% stake and his wife, Datin Soon Gock Lan, owns the remaining 10% in Scoop Capital, which in turn owns a 100% stake in Golden Scoop.

While Scoop Capital is obliged to extend an unconditional mandatory takeover offer to acquire all of the remaining 48.49% stake in Apollo Food at RM5.80 per share, it intends to maintain the listing status of the company on the Main Market of Bursa Malaysia. The offer price for the remaining shares is at a 7.4% premium to Apollo Food’s last closing price prior to the announcement of RM5.40 on Dec 15.

In his tenure as president of Golden Scoop, Cheah has maintained a very low profile. In a July 2015 interview with Tatler Malaysia, he said a trip to the US in his late 20s changed his life when he tried Baskin-Robbins ice cream for the first time. Believing that it had great potential in Malaysia, he opened the first Baskin-Robbins in Subang Parade, Selangor and as they say the rest is history. In 2013, the businessman was in the news when Scoop Resources Sdn Bhd, another private vehicle of his, reportedly bought one of Petaling Jaya’s oldest emporiums, Wisma Thrifty, in Jalan Barat for RM42 million.

The Apollo Food acquisition is the second major merger and acquisition in the local food and beverage industry in 2023. Prior to that, Farm Fresh Bhd bought a 65% stake in The Inside Scoop ice cream retail chain for RM84 million. In 2022, family-owned confectionery Cocoaland Holdings Bhd was sold to Fraser & Neave Holdings Bhd and taken private. — By Kang Siew Li

 

POLITICS IN THE WAY

 

Datuk Ahmad Nazim Abdul Rahman

CEO of Lembaga Tabung Angkatan Tentera

 

Datuk Seri Mohamad Hasan

Former defence minister

 

Datuk Ahmad Nazim Abdul Rahman was appointed CEO of armed forces fund Lembaga Tabung Angkatan Tentera (LTAT) in mid-June 2021, taking over the reins from Datuk Seri Amrin Awaluddin, who moved to pilgrim fund Lembaga Tabung Haji.

Much of Ahmad Nazim’s work in restructuring an ailing LTAT and its key assets parked under its flagship Boustead Holdings Bhd was revealed this year, with most of his plans supported by former defence minister Datuk Seri Mohamad Hasan (Mat Hasan), who was recently made minister of foreign affairs.

The restructuring of LTAT and Boustead Holdings hinged on the privatisation of the latter, which was concluded at end-June with LTAT forking out RM703.25 million for the remainder 40.58% it did not own in Boustead Holdings.

A second key feature of the restructuring and rehabilitation of LTAT was the planned sale of a 65% stake in Boustead Plantations Bhd (BPlant) to Kuala Lumpur Kepong Bhd (KLK), after a joint privatisation by the two entities. Boustead Holdings, which had been privatised by LTAT, would sell a 33% stake in BPlant to KLK for RM1.15 billion. LTAT would hold on to the 35% it already owned in BPlant.

There were other features to the privatisation and restructuring of BPlant, such as the carving out of two parcels of land — the Balau Estate and Malakoff/Mayfield Estate — for LTAT or Boustead Holdings to undertake property development. LTAT and Boustead Holdings have the first right of refusal to acquire or form any arrangement with BPlant on those lands.

However, the deal was thwarted by dissatisfaction in political quarters that BPlant was being taken over by a non-bumiputera-controlled entity. LTAT — as KLK’s partner in the privatisation — has to carry on with the RM1.55 per share offer on its own.

Both Mat Hasan, the defence minister at the time who was tasked with overseeing LTAT, and Ahmad Nazim received much flak for the plan, despite the deal having its merits. To salvage LTAT and ease its woes, the government is looking to inject RM2.3 billion, in favour of the long-term solution Ahmad Nazim had proposed.

In December, Boustead Heavy Industries Corp Bhd (BHIC) — a 65% unit of LTAT — proposed a partial debt settlement agreement with three banks totalling RM183.26 million and the full settlement of its RM234 million debt with Boustead Holdings, via a combination of cash and the issuance of redeemable convertible preference shares. Boustead Holdings, which as at end-March this year had RM10.56 billion in total debts and is in need of funds itself, will be paid in new shares.

The whole exercise was undertaken to prevent BHIC from falling into the cash-strapped Practice Note (PN) 17 category. LTAT is already grappling with Pharmaniaga Bhd, a 60.44% subsidiary, languishing in PN17.

With Datuk Seri Mohamed Khaled Nordin taking over the defence ministry portfolio in the recent cabinet reshuffle, there are many who say that Ahmad Nazim’s days at the helm of LTAT may be numbered. Mat Hasan, meanwhile, has been moved to a different portfolio as minister of foreign affairs.

It is also noteworthy that Mohamed Khaled Nordin was chairman of Boustead Holdings from May 2020 to August 2021, which means he would have some knowledge on the running of the company.

For their gallant attempt at restructuring LTAT, both Ahmad Nazim and Mat Hasan deserve some praise, but sadly, with so many political considerations at play, it looks like neither will get even a pat on the back. — By Jose Barrock

 

 

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