The transaction is deemed as a landmark divestment as it is Khazanah's first divestment of its entire stake in a major government-linked company (GLC).
The decision was made after an extensive two-stage process as well as rigorous selection to ensure that the new shareholder was able to bring Pos to the next level of growth.
Khazanah managing director, Tan Sri Azman Mokhtar said DRB-Hicom was chosen based on their overall bid, which offered not only a defined strategy but also an executable business plan and an acceptable offer price.
“Their proposed strategy and business plan in turn provides an effective platform for Pos' growth, if adopted by the board of Pos as a whole,” he said in a statement yesterday.
The offer price of RM3.60 per share is subject to the modification of the special rights redeemable preference share in Pos (special share) held by Minister of Finance Inc. (MoF).
This modification inter alia includes the reservation to appoint up to two board members in Pos; and the removal of rights to appoint the chairman and managing director of Pos and fix their respective remunerations.
This condition precedent is not within Khazanah's control, as it is the sole prerogative of MoF to make any modification on the special share.
The conditional offer price is also subject to the variation in the use of 16 plots of identified lands owned by the Federal Lands Commissioner and leased to Pos. The current terms of the lease only allows for postal services use, while the variation provides for the inclusion of commercial use, over and above the mandatory postal use. In the event the variation does not happen by Dec 31, DRB-HICOM will be refunded 10 sen per share or RM17.30mil.
Khazanah adopted a robust strategic divestment process which involved an open bidding process and a merit-based and transparent selection process. Conducted in two stages the first stage involved addressing key aspects of Pos' macro business and regulatory environments, while the second stage revolved around the restricted tender process.
Stage one saw the resolution of the long-running issue relating to the salary of postmen and the revision of postal tariffs. The postal rate revision took effect in July 1, last year and subsequently, Pos also resolved a long outstanding pay revision for postmen in the same month.
Stage two started with the pre-qualification phase, where Khazanah appointed CIMB Investment Bank Bhd and McKinsey & Company as advisors for the transaction. A total of 48 parties were approached to submit their respective proposals, of which 10 parties expressed their interest to participate and were pre-qualified.
Khazanah then proceeded to the indicative bid phase where all 10 parties were invited to submit their bids. Of these, five reverted with their respective bids where they were all given detailed and equal opportunities to meet Khazanah's advisors and explain their respective strategy and business plan submission.
Of the five bidders, four parties submitted their binding bids.
An independent evaluation panel comprising five senior professionals from the public and private sector with extensive postal and corporate experience had evaluated all the bidders' proposal on the basis of anonymity, where the bidders' names were coded.
The panel, with the assistance of Khazanah's advisors, evaluated the strategy and business plans first. Based on this, the bidders were shortlisted to a final two. Subsequently, the offer price envelopes were opened and evaluated compositely. Both shortlisted bidders were given the opportunity to present to the panel. The panel's evaluation was based on a composite score between strategy and pricing, whereby strategy accounted for 60% and pricing 40%. Based on the composite score, the panel unanimously recommended DRB-HICOM.
Azman said there was a fit and proper test of the new majority shareholder which includes promoting the sustainable development of the universal service obligations (USO), as well as the commitment to retain existing staff in their business plan.
“The commitment to fulfil the social obligations under the USO (as required under the Postal Services Act, 1991) is crucial as postal services have an impact on the rakyat, especially for those residing in remote or rural areas,” he said.
Khazanah's emphasis on strategy and business plans within the evaluation process does not in itself make any assumption of control or otherwise. The process required bidders having to state, in their own opinion, whether a general offer (GO) would be necessary or not.
Khazanah's executive director of investments, who was the project director for this strategic divestment, Mohammed Rashdan Mohd Yusof said it was the buyer's prerogative, and not of the seller, to determine whether a GO was necessary, as only the buyer can ascertain the extent of control they exert over Pos after they acquired the 32% stake.
“Furthermore, the divestment process did not reveal any information to the bidders beyond readily available market information” he said.
Azman concluded: “As a responsible seller to stakeholders including minorities and the rakyat, our emphasis was to ensure that the successful bidder had a robust business plan to both deliver their USO and unlock value and for them to discuss at the Pos board.
The divestment of Khazanah stake in POS was first announced in March 2010 by Prime Minister Datuk Seri Najib Razak at Invest Malaysia 2010 conference.
Since then, many prominent names were speculated to be the buyer of the stake. It was reported that besides DRB-HICOM, Nationwide Express Courier Services Bhd and SCOMI GROUP BHD were among the shortlisted bidders.
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