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November 28, 2006
Let's Make A Deal
Delving into the details of the mega plantation merger proposed by non-plantation company CIMB (I didn't realise the company knows so much about how to run the palm oil industry), some things need further clarification.
Oh, one thing's for sure is that Najib at least tried to deceive the people, if not lie to us outright, as his brother Nazir confirmed yesterday:
"This is a CIMB proposal to enable the merger of these complementary entitites to create value from scale and synergies," said CIMB Group chief executive officer (CEO) Datuk Nazir Razak. [Business Times]
"This is a CIMB proposal". Not "this is PNB's initiative".
But as some of you have pointed out, I shouldn't be too upset, as Najib is a politician after all.
I suppose it was par for the course, although I still believe it was a howler of a bogey.
(You play golf, Datuk Seri?)
Anyway, what I want to know more revolves around this:
Synergy, which will become Malaysia's fifth-largest listed firm by market value, will incorporate the plantation as well as other non-plantation assets of the three firms, but it is unclear whether the assets will be spun off or retained, Nazir said. [Reuters]
As Business Times reports it:
"The heart of this integration is in plantations and property," he told reporters at a press conference yesterday.Negara Properties, a subsidiary of Golden Hope, is left out of the merger as the company is not seen as "a priority in terms of the integration and synergy creation exercise", Nazir said.
... "With all the eight companies' businesses lumped into Synergy Drive, it would be up to its management later to decide what to do with the non-plantation assets," Nazir said. [Business Times]
From what I gather, the non-plantation and non-property assets look set to be sold off.
I'm fine with that, as long nobody gets played out or short-changed or forced to do things they don't want to, especially the public and minority shareholders.
Already, we have this:
Kumpulan Guthrie Bhd has agreed to sell Guthrie Corridor Expressway Sdn Bhd to Projek Lintasan Kota Holdings Sdn Bhd (Prolintas) for RM936 million in cash and loan stocks.In a statement, Guthrie said Prolintas will pay RM5 million for Guthrie Corridor Expressway (GCESB), and settle inter-company balance GCESB owes the group via RM431 million cash and RM500 million nominal value of redeemable loan stocks of GCESB. [Business Times]
Prolintas is 100% owned by PNB, which means there is public interest involved here.
Is the deal good business? Maybe somebody can enlighten us.
(What the hell is PNB doing owning a highway? Well, see it this way -- somebody had to pay for it)
Another noteworthy asset is this:
Sime Darby said in a statement its equipment division continued to be the largest contributor in terms of profit before unusual items, interest and taxes (PBUIIT), providing 42% of the group's PBUIIT and growing by 13% from the previous corresponding period. [The Star]
What's that say to you? To me, it not only says that Sime Darby is not just a plantation company, it says that if you described Sime Darby as a heavy equipment provider, no one could say you're wrong.
Since Nazir says Synergy Drive is largely gonna be a plantation and property play, I wouldn't mind taking over Sime Darby's equipment division myself.
Posted by aisehman at November 28, 2006 04:41 PM
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What is interesting is very little is known or revealed about the shareholders or beneficiaries of Synergy Drive. Only one paper reported it cursorily as "trustees for charitable concerns". Who are these charitable concerns ? UMNO ? This had better be examined clearly and transparently because the net effect is that Synergy Drive will end up owning 45 pct of the merged entity (PNB will have 45 pct, when it previously had 100 pct, and EPF will have 10 pct).
Still, something is not right when Nazir executes the deal on the opposing side of PNB, who has Najib as a trustee. Isn't a trustee supposed to act in the interests of PNB ? Are we to believe that Najib and Nazir cooked up this deal in the interests of PNB ?
Posted by: Godfather at November 28, 2006 05:54 PM
Yeah, would be interested in all Sime non-plantation assets as well.
Guess that's the part which has no script yet... This is a mega story that is still unfolding and way on the other side of what a sogososha is.
Meanwhile, this episode will take a year in the making... Let's hope they will be transparent all the way and not just shoot the breeze at the fairways.
Posted by: matmerah at November 28, 2006 06:52 PM
Dear Aisehman,
As regards your statement on why PNB is owning a highway. Well it already does via Prolintas. I'm talking about the RM800 mil Ampang Elevated Highway. So why shouldn't it? Ada expertise kan?
So we are already paying...in that sense. Anyone who wants to go to the farther reaches of Ampang without jam certainly will.
That said, I must say that I don't dispute other parts of your post. I do agree that the merger of the three giants sound suspicious.
Posted by: galadriel at November 28, 2006 08:25 PM
Well..there are some interesting facts about the latest saga involving PNB. PNB, albeit being a corporation and subject to be under purview of Company Act 1965, its corporate governance practices are in no way reflecting as an corporate entity. PNB's board is in no way has full control in dictating and formulating any policies to chart way forward for the company. The reason?? None other than Yayasan Pelaburan Bumiputra (YPB). YPB which was responsible in the birth of PNB is the one who will decide everything for Board of PNB to note. Now, you might be asking who's who behind YPB? None other than those who are sitting at front rows during UMNO General Assembly. Now, still wanna argue whether the move is indeeds PNB's initiative or not??? These two brothers definetely will have last laugh. What a daylight robbery!!!!!
Posted by: penyamun tarbus at November 28, 2006 09:03 PM
what the fucks is going on. the merger is making every motherducker more confused.
Posted by: nstman at November 29, 2006 04:15 AM
Prolintas became PNB company thru Percon Corp ( also PNB wholly owned, focus on construction but already tutup kedai ). Percon built Ampang - KL elavated highway and Prolintas manages it. PNB wants to make Prolintas manage all highways under PNB group because managing highway is Prolintas core business and not Gutrie's core business. Gutrie built GCE because they wanted to develop their land bank around the highway.
Posted by: takbolehcakaplagi at November 29, 2006 09:02 AM
There is no doubt that the non-plantation and non-property busineses will be spunned off. With a plantation and property company this size, its already a tough task to manage it given that the plan will be to go higher up the value chain of the busineses.
The crown jewel of Sime Darby portfolio is the equipment and auto business. I have a feeling that the auto-business will likely be somehow combined with Proton but that have the issue of a standalone equipment business. The could just spin it off in one entity with PNB controlling it but it sounds wieldy. Equipment and auto business really are not the same business.
The other attractive one is the power and utilities.
Posted by: Bigjoe at November 29, 2006 10:53 AM
I smell that someone is being "forced" by someone else to annouce the deal as quickly as possible before it's too late!!
Posted by: Benta at November 29, 2006 11:04 AM
Aisehman,whether or not cimb know anything about plantation business is beside the point to our politicians. This has been the story of malaysian (specifically malay) corporate life: let others build up a company, then use public money to buy them up.
Plantations used to be run by people in shorts sweating it out in the sun, not by some keyboard crunching political appointees who occasionally drop by the estates on the way back from a golf game.
IOI's lee rode motorbike for a long long time before he could taste the fruit of success. These companies run a tight and lean ships. Hence the low cost, high profitability and consequently impressive bottomline, and share prices (compare ioi, klk, etc to guthrie, g hope, etc.)
These companies' forefathers may not know the term KPI but they surely run them prudently. Now all the glc's hype is kpi. Even the pm is trying to run the country like a company...'thinking out of the box' etc..
lim say chong built up ccm for many years and made a lot of money selling it to pnb at its peak...
that's the story of our life
Posted by: idris at November 29, 2006 11:15 AM
galadriel, takbolehcakaplagi:
Thanks for the explanation on PNB and Prolintas.
But my issue is not with the viability of Prolintas' Ampang Elevated Highway or the Guthrie Corridor Expressway.
My issue is with PNB being directly involved in the highway business.
PNB is supposed to manage investments made using our money (yes, it is our money), not get directly involved in any business.
It's like this: Say I'm a crony, and I have a billion-ringgit construction proposal (don't they all?), but I don't have the money to finance it.
What do I do? I get PNB to pay me to build it. Heck, I can even get PNB to take over everything so I can run away with my (your) money and not get saddled with the "burden" of running the damn thing.
Fundamentally, what I'm saying is that PNB should not be in the business of running businesses.
Posted by: Aisehman at November 29, 2006 12:00 PM
Aisehman said:
"PNB is supposed to manage investments made using our money (yes, it is our money), not get directly involved in any business."
===================
Exactly how I feel as a unit trust holder of ASN & ASB.
Posted by: Honey at November 29, 2006 12:13 PM
the talk about plantation merger has been around since quite sometime, but nothing serious took place. but this time around it may turn out "real" though PNB ceo says that PNB may not agree with the proposed merger. would he succumb to the pressure? had he learned a lesson what happen to Datuk Khalid Ibrahim former Guthrie CEO and Dr Radzuan, former I&P MD?
Posted by: abwa at November 30, 2006 12:04 PM