RM3bil takeover bid for MMC
PETALING JAYA: Billionaire Tan Sri Syed Mokhtar Al-Bukhary has proposed to take conglomerate MMC Corp Bhd private at almost RM3bil and offered to buy out exiting shareholders at a premium of over 70%.
His indirectly owned company, Seaport Terminal (Johore) Sdn Bhd, told Bursa Malaysia yesterday that it plans to privatise MMC by way of a selective capital reduction and repayment (SCR) exercise.
The offer price is RM2 per share as compared to RM1.30 yesterday, prior to trading suspension in the afternoon session. The share price has jumped by almost 23% in the last two weeks.
A SCR is a process of cancelling only certain shares out of the entire shareholding, allowing certain shareholders to exit. The remaining shareholder will waive any right to a return of capital and hence, the capital or money will only be paid to the exiting shareholders.
In the case of MMC, the SCR will allow Seaport Terminal to own the entire equity of MMC after minority shareholders exit the conglomerate following the SCR exercise.
Rakuten Trade Sdn Bhd head of equity sales Vincent Lau (pic) said the takeover may create the opportunity for the group to unlock the value of its “hidden” assets. “MMC is very diversified and there is concern that the value of each asset may not be fully reflected in the share price.Rakuten Trade Sdn Bhd head of equity sales Vincent Lau (pic) said the takeover may create the opportunity for the group to unlock the value of its “hidden” assets. “MMC is very diversified and there is concern that the value of each asset may not be fully reflected in the share price."
A source close to the conglomerate said RHB Investment Bank Bhd is working on the privatisation deal.
MMC, whose share price has struggled to make major gains in the past several years, is no stranger to takeover rumours as the market has speculated about its privatisation for years.
Syed Mokhtar is not new to takeover deals, having privatised listed companies such as Proton Holdings Bhd and Tradewinds Corp Bhd in the past decade.
Analysts who spoke to StarBiz said that the privatisation may bode well with MMC.
Rakuten Trade Sdn Bhd head of equity sales Vincent Lau (pic) said the takeover may create the opportunity for the group to unlock the value of its “hidden” assets.
“MMC is very diversified and there is concern that the value of each asset may not be fully reflected in the share price.
“Once privatised and delisted, the group can unlock the value of each asset. One way is listing the assets individually, ” he said.
Lau believes the timing is right for Syed Mokhtar to launch his privatisation bid, despite the volatility in the market.
However, he noted that many privatisation deals in the last one to two years did not go through.
These include MAA Group Bhd, Cycle & Carriage Bintang Bhd in 2020 and LTKM Bhd.
“Some failed even after the offeror raised the offer price. Perhaps minority shareholders see greater value in those companies, ” said Lau.
Meanwhile, MIDF Research analyst Ummar Fitri Hassan Assaari said the conglomerate has been undervalued by the market, despite its good results.
“Given the underperformance of its share price, especially trading at a price-to-book value ratio of below one, shareholders may be tempted to accept the offer as it is at a premium to its share price.
“Of course, in the bigger scheme of things, shareholders might miss out on the potential earnings rebound from a rebounding global trade and anticipated catalyst from MRT 3, ” he said.
Should the privatisation move be successful, Ummar said it is “possibly good” for MMC as it will have greater flexibility in pursuing business interests without too much regulatory worries of a listed company.
“Furthermore, given the company size and scale, the typical advantage of access to the equity capital market might be something that the company is able to forgo for now as it can raise capital or funding via other means.
“One way is through the debt market, given the current low interest rate environment which is very attractive to raise capital via this means.
“Shareholders will enjoy the lower cost of capital in comparison from raising via the public market, ” he added.
Seaport Terminal, which is the controlling shareholder of MMC with a 51.76% stake, said the SCR was proposed because investors “appear to be unable to accord MMC with a valuation in line with its net assets.”
It added that the market price of MMC shares does not reflect the underlying value of its diversified business.
The company also said the proposed SCR provides greater flexibility to MMC in managing and developing its existing businesses, while exploring opportunities without regulatory restrictions and compliance costs tied to its listing status.
“The proposed SCR provides an opportunity for the entitled shareholders to exit and realise their investments in MMC at a premium over the prevailing market price of MMC shares, ” it said.
Based on the filing with the stock exchange, the offer price of RM2 stood at a premium of 70.94% compared to the closing price on May 28.
In comparison to yesterday’s price, the premium was almost 54%.
Seaport Terminal said that pursuant to the proposed SCR, the other shareholders will receive a total capital repayment of RM2.94bil, which will be funded by way of an advance from Syed Mokhtar to MMC.
Upon the completion of the SCR, the share capital of MMC will be reduced via the cancellation of 1.47 billion shares held by the other shareholders.
“In view that the capital reduction of the proposed SCR is higher than the existing issued share capital of MMC of RM2.34bil comprising 3.05 billion MMC shares and to facilitate the proposed SCR, a bonus issue is proposed to be undertaken by MMC to increase the share capital of MMC up to a level sufficient to carry out the proposed SCR, ” Seaport Terminal said.