ONE of Japan’s largest conglomerates, Mitsui Co Ltd, has bought a stake in Axiata Group Bhd ’s digital businesss for an undisclosed amount.
This marks a milestone for Axiata, whose venture into the digital business had, for some time, left the analyst community unimpressed.
Since starting on the digital space journey in January 2014, Axiata has gone on a shopping spree. It bought 30 companies, mostly smallish firms, but the whole segment has been seen as a drag on the group’s balance sheet.
But things are becoming more visible after Axiata streamlined and consolidated the companies. There are three major firms, with the rest either being transferred out, shut or sold.
The streamlining was also one of the conditions set by Mitsui before it invested in Axiata’s digital business, held via Axiata Digital Services (ADS). The initial reaction to the stake sale saw Axiata’s share price rising yesterday. The stock rose by nine sen, nudging up its market capitalisation by RM817mil to RM36.67bil. It also raised the FBM KLCI by 1.42 points, making the stock the biggest gainer yesterday.
Mitsui is also the second foreign investor in Axiata’s digital business.
Another Japanese company, Sumitomo, had taken a 19% stake in a unit (ada) within ADS.
“We are very pleased with the investment by Mitsui and Gordian Capital, as it marks a validation point for Axiata’s digital and Internet venture journey,’’ says Axiata president and group CEO Tan Sri Jamaludin Ibrahim.
The investment establishes a pre-money enterprise value of US$500mil for the core digital business of ADS, which includes Boost, ada and Apigate.
Jamaludin has been instrumental in the promoting Axiata in the digital space. While he sees the potential, most analysts did not share his enthusiasm. Hence, the validation is critical for Axiata.