Wednesday, December 22, 2010

New $8b offer for Malaysia's biggest toll-road operator

ANN - Tuesday, December 21
Petaling Jaya (The Star/ANN) - A competing bid to buy the assets and liabilities of PLUS Expressways Bhd, Malaysia's biggest toll-road operator, has been presented to the latter's board at an offer price that works out to RM5.20 (US$1.6) per PLUS share, 13% higher than the existing offer by UEM Group and the Employees Provident Fund (EPF).
The new offer is by one Tan Sri Ibrahim Mohd Zain, a 67-year-old seasoned banker, who was a former chairman of Bank Rakyat and had also helmed Amanah International Finance Bhd and Oriental Bank Bhd.
He was also a director of K&N Kenanga Bhd and is currently on the boards of AMMB Holdings Bhd and Tamadam Bonded Warehouse Bhd.
Ibrahim told The Star's Starbiz in a telephone interview that his vehicle making the offer, Jelas Ulung Sdn Bhd, was not linked to any other large corporate personalities or institutions, including previous bidders for PLUS, namely Asas Serba Sdn Bhd and Tan Sri Syed Mokhtar Al-Bukhary.
Ibrahim said while he had been looking to take over PLUS for a while now, his plan got into motion about a month ago, after he received confirmation from Bank of China Ltd as the provider of funding for the deal.
Jelas Ulung's other director is Datuk Ghazali Mat Ariff, a practising lawyer and chairman of Amalgamated Industrial Steel Bhd and a board member of the de-listed Eden Enterprises Bhd.
Interestingly, the Jelas Ulung offer is not conditional on any compensation from the Government. The terms of the offer also state that no further toll increases will be requested by the offeror. Jelas Ulung said it would also not request for any tax waiver from the Government.
The offer document also said that it was the intention of Jelas Ulung to "provide a high degree of certainty as to the completion of the transaction".
The offer document said BOCI Asia Ltd, a subsidiary of Bank of China, "has agreed to support the financing of the purchase consideration."
It also revealed that the debt funding of the deal would be "comfortably and adequately covered, with a minimum debt service coverage ratio of two times."
Ibrahim explained that he will be raising RM38bil for the deal, of which RM33bil will be raised from borrowings and the balance RM5bil from equity. Of the RM38bil, RM26bil ($8.2bil) will be used to buy the assets of PLUS in cash and the other RM12bil to pay off loans and liabilities of PLUS. The debt of RM33bil will be raised through a combination of bonds and term and bridging loans, he said.
"Bank of China will oversee this debt financing, providing a portion of it," he explained, adding that "They (Bank of China) are big and confident and hungry."
Another notable aspect of the offer is that while it is not expressly conditional on a due diligence exercise by Jelas Ulung, it is subject to PLUS and its subsidiaries not doing a few things, including incurring a liability that is in excess of 1% of the shareholders' funds, or doing something which would result in a material change to its concession agreements.
Ibrahim said Jelas Ulung had hired Shearn Delamore as its legal adviser for the deal but had yet to appoint an investment banker.
"That would come at a later stage," he said.
He also said there were no plans at the moment to launch similar offers for other tolled-highway operators.
"The onus is now on the PLUS board to decide which is the better offer," he said.
In a statement to the media, Jelas Ulung said: "We are making this offer after being inspired by the current Government's economic policies, in particular the transformation plans This has inspired not only us but also foreign investors Bank of China through its subsidiary has given total support for us to acquire the business of PLUS."
Asked about the basis of his RM26bil offer, Ibrahim said they had done their own financial modelling and used assumptions of Malaysia's growing population and expectations of more users of the highways.
"We expect a higher level of productivity in running the toll roads which, in turn, will contribute to our revenue, making any toll increase unnecessary.
"We are confident of maintaining the current level of service which the road users are used to and hopefully improve further, especially on safety aspects," Jelas Ulung said in its media statement.
Chris Eng, head of research as OSK Research said: "On the surface, Jelas Ulung's offer price that works out to RM5.20 per share sounds like a good price. The deal is also interesting as it is transparent on the funding of the offeror."
OSK had suggested that PLUS shareholders hold out for a higher price than the RM23bil or RM4.60 per share offered by UEM-EPF.
The PLUS board said yesterday that it would "deliberate on the terms of the offer by Jelas Ulung and decide on the next course of action, taking into consideration the offer from UEM-EPF which was accepted and announced on Nov 9, 2010. An announcement will be made once the board has made a decision on the offer."
PLUS shares ended flat yesterday at RM4.36 with some four million changing hands, indicating there was hardly any speculation in the market about a higher bid for the company.
The new offer is likely to result in a postponement of the much-awaited PLUS EGM slated to take place on Thursday for minority shareholders to vote on the UEM-EPF offer. Jelas Ulung's offer is valid until March 18, 2011.
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