Upcoming EGM may shed some light on this
Media Prima Bhd has always been synonymous with the political party Umno, and with the federal government in Putrajaya.
But a lot has changed over the past six months, since Umno, as part of the Barisan Nasional government, was toppled during the May 9 general election.
While Umno still holds a stake – about 19% based on the media company’s last annual report – in Media Prima, it is very likely that it no longer holds the reins of the company. It no longer has the political clout, which means no more dishing out government contracts and no more funds to pump into the company.
Taking cognisance of the changes, sources say the political party may exit Media Prima if it gets a good deal.
Towards this end, it is notable that Tun Daim Zainuddin, who ran Media Prima in the 1980s, recently denied that he is looking to take control of the media company once again.
He was reported as saying that while Umno is looking to sell its stake in Media Prima, he was not interested in controlling a media empire again.
However, speculation is rife that parties close to Parti Pribumi Bersatu Malaysia (Bersatu) are keen on taking control of Media Prima.
Bersatu is the political party led by Tun Dr Mahathir Mohamad, making up part of the current ruling government.
The appointment of Mustapha Kamil Mohd Janor as Media Prima’s executive director, news and editorial, last month adds credence to the speculation.
Mustapha left Media Prima in May 2016 and became a staunch critic of 1Malaysia Development Bhd (1MDB) as well as of the former ruling government’s tight control of the media group. With the completely new political landscape, it is needless to say that there has been much speculation about who really calls the shots in the media company today.
The group’s upcoming EGM, which will be held on Monday, November 26, may shed some light on this.
The EGM is being held to vote on the company’s proposed sale of its New Straits Times Press (M) Bhd’s (NSTP) Balai Berita in Bangsar and the land where its printing plant is located in Shah Alam to PNB Development Sdn Bhd for RM280mil, which was first announced in August.
Taking a look at the top five shareholders of Media Prima apart from Umno, there is the Employees Provident Fund Board (EPF) and Amanah Saham Bumiputera, through which Permodalan Nasional Bhd (PNB) owns its over 10% stake.
Kumpulan Wang Persaraan (KWAP), meanwhile, had a 2.07% stake as at February 28, 2018. Another shareholder to watch is nominee company Morgan Stanley & Co LLC, which has steadily been accumulating shares in Media Prima over the past few months.
It is not known who is behind the company and why it is choosing to accumulate shares in Media Prima - a company which has resorted to selling its prized assets to stay afloat.
According to filings to the stock exchange, the financial services group based in the UK now has a 12.73% direct stake in the company. EPF, meanwhile, has a 12.029% direct stake.
Back to the EGM, all eyes will be on how shareholders vote on the proposed asset sales proposed by the management.
PNB, being an interested party in the deal, will not be able to vote, which means all eyes will be on whether Umno, EPF and Morgan Stanley will back the proposal to sell the prized assets.
Zooming in on the deal itself, it could raise some questions, such as why the assets are sold at an aggregate discount of 8.35% from the market value of of RM305.50mil, and why the company opted to dispose the three assets as a “package deal”.
According to the circular to shareholders dated November 2, 2018, several parties had expressed interest for the properties, but only two conditional written offers were received - one for the Bangsar Property, and one for the Shah Alam property and Shah Alam vacant land.
“Both conditional written offers received were less attractive in comparison to the offer made by PNB Development.
“Upon our evaluation of the written offers received, we concluded that PNB Development’s offer was the most suitable offer in terms of pricing and other material terms (including the sale of the sale properties as a package, as opposed to the disposal of individual sale properties),” the circular reads.
A fund manager say the assets, if sold individually, could fetch a higher price for Media Prima.
The company, however, cites “lower completion risk” as its reason to sell the assets as a package instead of disposing it individually. Looking at the breakdown of the three assets, the Bangsar property is being sold at a 9.37% discount, the Shah Alam property at a 2.37% discount and the Shah Alam land at a 23.26% discount.
The media company has said the proceeds will be used to pay up debts and to reinforce its existing business.
“The proposed sale will provide an immediate boost to our group’s cash flow and will allow our group to reduce our borrowings level significantly, resulting in interest savings and net cash inflow.
“This further enables our group to allocate resources to reinforce the existing businesses and is expected to contribute positively towards our group’s overall transformation plans,” it says.
The other side of the deal is the tenancy agreement, which will enable Media Prima to continue to operate its headquarters in Bangsar and its printing plant in Shah Alam without disruption for a minimum period of six years.
The tenancy agreement is a condition under the sale purchase agreements entered into by the two parties.
Based on the circular to shareholders, Media Prima will be paying the market price for the monthly rental rate - at RM2.20 per sqf for the Bangsar property and RM2 per sqf for the Shah Alam property.
The market rate is between RM2 to RM2.30 and between RM1.80 and RM2.10 respectively.
It raises the question as to whether this is really a good deal for the media company as it is selling the assets at a discount, yet still paying market price for its monthly rental payments.
For PNB on the other hand, this is clearly a good deal as it not only gets the prized assets at a discount, but also has a ready tenant for minimum period of six years.
Independent adviser Mercury Securities Sdn Bhd deemed the proposed sale and leaseback exercise “fair and reasonable”.
“The proposals are fair and reasonable and are not detrimental to the non-interested shareholders of Media Prima, and the use of the net sale proceeds from the proposed sale for repayment of the term loan is in the best interest of the shareholders of Media Prima,” it said in its independent advice letter, recommending that shareholders vote in favour of the proposals during the AGM.
Moving forward, shareholders will have to decide during the upcoming EGM, whether the asset sales are the right way to go for the company.
The company is now operating in a new political landscape, and a new level playing field, without the steady flow of government contracts it used to enjoy.
In its most recent quarter, Media Prima recorded a net profit of RM31.95mil, up from a net loss of RM132.9mil during the same quarter of the previous year.
The media industry is undergoing a tough time, and Media Prima’s operations have been affected, along with other big players.
These conditions make Media Prima a prime takeover target – it operates in a tough industry and the major shareholder only has a 19% block. If indeed there is a serious party looking to take over the reins from Umno, some indications should show up at the upcoming EGM, along with some clarity on who calls the shots in Media Prima at present.
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