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Thursday July 2, 2009

Khazanah hits the M&A trail

KUALA LUMPUR: Khazanah Nasional Bhd is in the offensive mood for potential mergers and acquisitions (M&As) now that the global economy is on a better footing, says managing director Tan Sri Azman Mokhtar.

For the first-half year, Azman said Khazanah had to be defensive, which reflected its crisis-management stance then, to ensure that government-linked companies (GLCs) could weather the economic crisis.

“It appears that the worst is over for the global economy. Khazanah is now more on the offence for business opportunities that may entail M&A activities,” he said yesterday.

He was speaking at a media briefing after delivering his speech on Graduating To A Higher Class – Catalyzing A New Domestic Economy at Invest Malaysia 2009.

Asked if any M&As were pending, Azman declined to comment, except to say that the company was more open to M&A activities under the current economic climate.

“We are always in talks with various parties,” he said, adding that in any M&A activity, it would like to have the majority stake and management control of local companies, although that could be different with foreign companies.

Azman also said Khazanah would accelerate the trend of divesting through trade sales and reduce its stakes in large listed GLCs, subject to value, over the next two to three years.

“In the last five years, Khazanah has made divestments totalling RM12.6bil, locking in gains of RM3.6bil over 20 transactions,” he noted.

The Government’s investment arm had been gradually selling down stakes, especially through the issuance of exchangeable bonds and sukuk over the years, and might use the same instruments for future divestments, he said.

“We like exchangeable bonds and sukuk mostly because these instruments allow us to build value and get premium. However, one caveat is that it depends on the stage of the market and the value in the company.

Azman cited some of the successful sales – Bintulu Port, Port of Tanjung Pelepas, RHB Bank, Tradewinds Hotel and Time DotCom – which had resulted in a more efficient ownership structures that allowed new owners to gain more scale or enter into new and better alliances.

However, he said, Khazanah would retain investments in strategic assets in specific sectors such as power.

Meanwhile, Bernama quoted Azman as saying that investments totalling a staggering RM11.4bil had been executed in Iskandar Malaysia. The amount is 26.7% of the RM42.7bil investment committed since the inception of Iskandar Malaysia in November 2007.

It said Khazanah was also investing about RM90mil in Small Bone Innovations, Inc, a leading US-based specialised orthopedics company.

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