KUALA LUMPUR: UMW Holdings Bhd’s proposed takeover of Perodua’s substantial shareholder and auto parts manufacturer MBM Resources Bhd is expected to fall through as the deal edges closer to its October 2018 deadline.
Analysts feel the deal may not happen due to unattractive offer price as well as legal and structure complexity.
Affin Hwang Capital said the offer price of RM2.56 per share was unattractive as it valued MBM Resources at a 30 per cent discount of its net asset per share.
UMW had in March this year offered the RM2.56 per share to Med-Bumikar Mara Sdn Bhd for the latter’s 50.07 per cent stake in MBM Resources.
The price tag amounted to RM501 million, valuing MBM Resources at RM1 billion or 16.36 per cent higher than its market value when the offer was announced on March 9
As Med-Bumikar’s board had reportedly rejected the offer, UMW extended the offer for six months until October 31.
That was the second extension after UMW previously extended the validity from March 28 to April 30.
UMW’s pursuit of MBM Resources is aimed at ultimate control over national carmaker Perusahaan Otomobil Kedua Sdn Bhd (Perodua) in which MBM Resources has a 22.58 per cent.
The six-month extension also applied to UMW’s RM417.5 million offer to buy a 10 per cent stake in Perodua from PNB Equity Resource Sdn Bhd, a vehicle of UMW’s majority shareholder Permodalan Nasional Bhd. UMW is already a 38 per cent shareholder of Perodua.
According to reports, the proposed takeover by UMW may result in the loss of Perodua’s two Japanese partners, Daihatsu Motor Co Ltd and Mitsui & Co Ltd, which provide key technical expertise and access to technology.
Affin Hwang noted that MBM’s major shareholder MedBumikar could face legal obstacles from other Perodua shareholders.
The firm said the deal would likely fall through given the more severe negative implications with the potential loss of the Japanese partners.
Affin Hwang also said the RM4.2 billion implied price tag valued Perodua at 9.5 times 2017 price earnings ratio, which seems low for the country’s leading auto player.
Meanwhile, TA Securities Holdings Bhd analyst Abel Goon concurred that the offer price for MBM Resources was unattractive.
“The discount-to-book value was too large. If UMW can offer something better, it could be beneficial for both UMW and MBM Resources,” he said.
Affin Hwang, nevertheless, believes the proposed acquisition, if materialised, will enhance UMW Holdings’ financial position
“By increasing its stake in Perodua at a sensible price, (it will) strengthen its position in the Malaysian automotive market,” it added.