Frankly Speaking: Lack of clear policies in sale of GLC and GLIC assets

TheEdge Mon, Apr 01, 2024 11:00am - 1 month View Original

This article first appeared in The Edge Malaysia Weekly on April 1, 2024 - April 7, 2024

Ekuiti Nasional Bhd (Ekuinas) is finally exiting the highly competitive offshore support vessel (OSV) business.

Its exit from Icon Offshore Bhd had been the subject of speculation for several months. However, the buyer of Ekuinas’ stake in Icon, which is the private company belonging to the Lim family of the Yinson Group, comes as a surprise.

Singapore-based Liannex Corporation (S) Pte Ltd acquired a 50.1% stake in Icon from Ekuinas for 63.5 sen per share. Liannex is the private entity of Lim Han Weng and his spouse Bah Kim Lian. Lim is the founder and executive chairman of Yinson Holdings Bhd.

The transaction, which is now subject to a mandatory general offer, has some synergistic value. Yinson is a major provider of floating production storage and offloading vessels to oil and gas production companies. On this score, Liannex’s acquisition of Icon, which has 24 OSVs, is somewhat synergistic.

The new major shareholders of Icon should be able to build on the OSV business.

As for Ekuinas, its exit from the highly competitive OSV business comes at a time when this segment of the oil and gas industry is growing, with companies enjoying higher charter rates. Essentially, Ekuinas is exiting the industry when the market is at a high, which is the right thing to do for private equity firms.

However, what’s perplexing is this: How would the disposal of a majority stake to a non-bumiputera company help achieve the objective of Ekuinas’ formation?

To the uninitiated, Ekuinas was established in 2009 to increase bumiputera participation and wealth in the corporate sector by taking up stakes in private companies.

One would have expected Ekuinas to dispose of its interest in Icon to a bumiputera entity. This is in light of the aborted deal between Boustead Holdings Bhd and Kumpulan Kuala Lumpur Kepong Bhd (KLK) to take Boustead Plantations Bhd (BPlant) private in October last year.

The proposed KLK-BPlant deal was aborted at the last minute because there was opposition to it in parliament. Among other things, some parliamentarians contended that the proposal amounted to assets of government-linked companies being disposed of to non-bumiputera companies.

The Ekuinas transaction is healthy for the capital markets. But for more such deals to happen, the Ministry of Finance should come up with clear guidelines on the disposal of assets that are owned by government-linked entities.

In the end, the best policy is that decisions to buy and sell be based on merit, as in the Icon case, and not on race, as happened with the aborted KLK-Boustead deal.

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