YTL Corp Bhd ’s acquisition of a 51% controlling stake in Lafarge Malaysia Bhd has lit up an otherwise dreary merger and acquisition scene in Malaysia.
The RM1.6bil deal is also illustrative of the fact that strategic investors à la the YTL group see longer-term value in assets that public markets do not necessarily fully value.
The conglomerate is known for its bargain-hunting strategy. The acquisition of Lot 10 and its surrounding areas at the height of the financial crisis in 1998 underlines this.
Similar strategies were adopted in its pursuit of assets overseas such as Wessex Water Ltd in the United Kingdom and Singapore’s PowerSeraya power plant.
YTL Corp’s executive chairman, Tan Sri Francis Yeoh, has been apt to boast of the group’s ability to scoop up assets on the cheap.
On Thursday, YTL Corp through wholly-owned subsidiary YTL Cement Bhd offered to acquire a 51% stake in Lafarge Malaysia held by parent company LafargeHolcim Ltd of Switzerland.
Lafarge Malaysia is currently the biggest cement producer in the country with around 35% market share.
The purchase would vault YTL Corp to the position of dominant cement producer in the country, effectively cornering around a 60% market share.
In addition, LafargeHolcim has signed an agreement with YTL Cement Singapore PTE Ltd for the divestment of its entire 91% shareholding in Holcim Singapore Ltd.
However, the cement industry is suffering from a huge over-capacity not only in Malaysia but also the region. Cement plants have been running at close to half their utilisation rates for the last few years, a reflection of the stiff competition and lack of demand.