Why did billionaire Ananda first list his companis then privatise them?

IS T. Ananda Krishnan to be chastised for buying back all his companies that he had listed on the stock market? Why did he list them in the first place, only to buy them back at a later time?

While on the face of it, his moves do seem difficult to understand, one needs to accept a few facts about his deals. These facts indicate that Ananda is very much playing by the rules.

Top on the list is that every time Ananda attempts to take his company private, he strives to be as fair as possible to minority shareholders, in terms of the offer price he makes and the method of privatisation.

The offer price is always at a decent premium to the market price and always above analysts’ target prices.

In all his privatisations, Ananda could have opted for the more questionable method of buying the assets and liabilities of his companies. This method needs a lower threshold of shareholders’ support and is seen as less advantageous to minority shareholders.

Another often heard concern about privatisations of major listed companies is that the major shareholder has intentions of listing the same asset in another market that would provide a loftier valuation.

This, however, is unproven. It is hard to imagine a Malaysian asset fetching a higher value in another market. Indeed, the opposite is more likely the case. There are a few small Malaysia-based companies with listings in Singapore and London but these assets seem to carry a “Malaysia” discount when listed there, possibility because investors are less familiar with the company and less in touch with the scene compared with investors in the home market would be.

Back to Ananda. When he took Maxis Bhd private in 2007, there was the concern that Maxis would be re-listed elsewhere. What Ananda did do was to bring Maxis back to the Malaysian market, albeit, minus its overseas assets. One could argue that Ananda gained a lot from that exercise, but it shows that Ananda has no intention of listing his Malaysian assets abroad. He may do so with his overseas assets as that only makes sense and lends credence to the theory that the best valuations for assets are derived in the very markets those assets are in.

The same argument can be made for Tan Sri Robert Kuok. While he had injected the now de-listed PPB Oil Palms Bhd into Singapore-listed Wilmar International Ltd in 2007, the end result is that PPB Group Bhd, which is still listed here, ended up with a significant stake in Wilmar.

The point is, neither Ananda nor Kuok has delisted one of their Malaysian assets here and relisted in another market solely on the basis that the other market is offering a higher valuation for that asset.

While that may be the case, nothing should be taken away from the fact that our capital market still suffers some problems. There is a lack of liquidity in some of the bigger capitalised companies. Some experts say this is what keeps some investors out of our markets. The lack of liquidity is a result of a combination of factors such as too small free float and lower volatility, due to the absence of instruments such as regulated short selling and securities borrowing and lending. But the other side of the coin is that these products tend to bring about speculation and leads to the issue of whether speculation is good for the market.

● Deputy news editor Risen Jayaseelan thinks that it is about time the proposed changes to takeover rules that raises shareholder acceptance levels are implemented by the authorities.