THIS year is fast shaping up to be one of big mergers and acquisitions (M&As) for the corporate sector, judging by the number of takeover announcements so far.
Although the stock market has, until recently, been largely uninspiring, the scene was quite the opposite in the corporate world, where captains of industry had been busy negotiating takeover deals, spurred on by merchant bankers.
Indeed, market observers point out that the country has not seen such a pace in M&A activities since the banking consolidation exercise in 2001 to create the 10 anchor banking groups.
The Securities Commission (SC), in its latest annual report, said 21 companies were involved in acquisitions last year, amounting to a capital value of RM4.16bil. This was lower than the RM4.4bil by 19 companies in 2001.
However, judging by the size of some of the deals that had taken off this year, the total value for acquisitions is expected to far exceed that in 2002 and 2001.
The director of a merchant banking group said he expected more takeover deals to take place in the second half this year and next.
If the (M&A) exercise is strategic and viable, companies will go for it,'' he said, adding that it was natural for firms to sometimes look at M&As as one way to grow their business, apart from organic growth.
He said that in the aftermath of the 199798 economic crisis debt restructuring was the main theme, as companies were saddled with debts. Now that debt restructurings have more or less been completed, it is natural for companies to look at M&As as one way to expand their business scope and operations,'' he added.
Another factor contributing to the increased M&A activity this year was the subdued performance of the economy and the stock market, he noted. When things are quiet, corporate captains have more time to review their long-term company strategies and directions, and to look for ways to increase shareholders' value. And M&As are a way where they can do that,'' he said.
The merchant bank director also noted that a lacklustre stock market was usually the best time for M&As. At a time when share prices are low, companies with deep pockets can afford to shop around, to look for value-for-money targets,'' he said.
He expects more M&As in the pipeline in certain sectors of economy.
We see more developments in the banking sector when the next round of consolidation takes place. We also expect more deals to come from plantation and property companies. In particular, we think there could be some sparks in the automotive industry as players gear up for the advent of the Asean Free Trade Area in 2005,'' he said.
As for the telecommunications sector, we think M&As there are more or less completed. We don't expect anymore deals coming out from the telcos for a while.
Yesterday, Kumpulan Guthrie Bhd said it would take its plantation units Highlands & Lowlands Bhd (H&L) and Guthrie Ropel Bhd private in a series of share swaps under a rationalisation exercise. Guthrie's property arm, Guthrie Property Development Holdings Sdn Bhd, will then assume H&L's listed status.
Recently, EON Capital Bhd and AMMB HOLDINGS BHD said they have received approval from Bank Negara to start merger talks, which if successful, would create the countrys third largest banking group with combined assets of over RM87bil.
In March, diversified BOUSTEAD HOLDINGS BHD surprised the market when it proposed to acquire the entire capital of its plantation subsidiary, Kuala Sidim Bhd.
A number of minority shareholders are, however, unhappy with the RM6 cash offer, arguing that it grossly undervalues Kuala Sidim.
In January, PacificMas Bhd said it has been given permission by the central bank to start talks on the merger of its insurance and equity businesses with those of Koperasi Angkatan Tentera Malaysia Bhd (KAT) and the Great Eastern group. The exercise will see Singapore's Great Eastern Holdings Ltd ending up with a 51% stake in PacificMas.
In the same month, conglomerate Malaysia Mining Corp Bhd (MMC) extended a voluntary offer to acquire all the shares in its engineering services subsidiary, MMC Engineering Group Bhd.
Another exercise was the privatisation of Public Finance Bhd by its parent, PUBLIC BANK BHD.
Meanwhile, the merger between Celcom (M) Bhd and TELEKOM MALAYSIA BHD is nearing completion.
Other M&As completed this year include Maxis Communications Bhd's takeover of TimeCel Sdn Bhd, and Island & Peninsular Bhd's merger with Austral Enterprises Bhd.
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