PetroSaudi to buy 37.21% in UBG for RM466mil


  • Business
  • Thursday, 14 Jan 2010

PETALING JAYA: Cahya Mata Sarawak Bhd’s (CMS) sale of its long-held substantial interest in UBG Bhd to PetroSaudi International Ltd for RM466mil is crucial to meet its funding needs for the multi-billion ringgit aluminium smelter project, Sarawak Aluminium Co (Salco), said a source.

“It is selling because of the smelter and, of course, Score (Sarawak Corridor of Renewable Energy; a regional development corridor) as it is ploughing a lot more investments in there. It needs the money,” said the source, adding that the company was also planning to issue bonds for this purpose.

Salco is a 40:60 joint venture between CMS and Rio Tinto Alcan (a subsidiary of Rio Tinto Aluminium, a leading global mining company based in Australia) to undertake the construction and operation of a huge smelter in Similajau, Sarawak with a projected initial production capacity of 720,000 tonnes per year. The global economic crisis and tightening liquidity situation last year, however, had delayed the project’s financial close.

The smelter project was touted as the catalyst for the state’s economic growth and Score’s cornerstone project. But it is now facing some competition. Recently, 1Malaysia Development Bhd (1MDB) and State Grid Corp of China teamed up to build a massive aluminium smelter as well as several hydro electric dam projects also under the Score banner.

“The latest development has made it more urgent for CMS to raise funds for its smelter project and is also a reminder that it could face some competition in bidding for projects under Score. This could explain the timing of the stake sale of UBG,” said a source.

Still, an observer said there were considerable opportunities for CMS to bag projects in the state, not least because the public-listed company is controlled by the family of Sarawak Chief Minister Tan Sri Abdul Taib Mahmud. The group is led by Taib’s eldest son Datuk Seri Mahmud Abu Bekir Taib, who is deputy chairman, and son-in-law Datuk Syed Ahmad Alwee Alsree who is managing director/executive director.

News of the takeover of UBG which was announced late last week took the market by surprise. CMS’ wholly owned Concordance Holdings Sdn Bhd and 51% owned PPES Works (Sarawak) Sdn Bhd have accepted the cash offer from PetroSaudi for their 37.21% stake in UBG for RM2.50 per share.

Majestic Masterpiece Sdn Bhd has also accepted the offer to sell its 52.6% stake in UBG. PetroSaudi will have to make an offer to the shareholders of the remaining 10%, which sources said largely comprised Sarawak-linked enterprises and funds.

Offer price

Incidentally, the offer price is the same as the general offer price for UBG shares involving a major corporate exercise in 2008 where CMS ended up with a 37.2% stake and Majestic a 52.6% in UBG.

Majestic is principally a wholly-owned investment holding company of Abu Dhabi-Kuwait Malaysia Investment Corp, a company controlled by Yousif Mana Saeed Alotaiba, Sabah Mohammed Sabah S. Alsabah and Datuk Tengku Ahmad Faisal with low-key Jho Low holding a 10% stake.

“We decided to sell because our earlier plan to tap construction opportunities (through UBG) in Dubai fell through due to the crisis. So, this is a good opportunity to monetise our stake and use the capital to venture into other sectors in Malaysia, which we believe have more growth,” said a source close to Majestic.

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