The much-anticipated plan to privatise PLUS Expressways Bhd was announced yesterday, with Khazanah Nasional Bhd and the Employees Provident Fund (EPF) offering a cash offer for the assets and liabilities of the highway concessionaire for RM23bil, which works out to RM4.60 per share of the latter.
Using a co-investment vehicle in which Khazanah’s wholly-owned unit, UEM Group, will own 51% and the rest by EPF, the offer is subject to a successful restructuring of the concession agreement on acceptable terms.
The proposed deal is said to be the largest merger and acquisition in Malaysia so far and is tied in with an announcement in Budget 2011 yesterday that the Government will not raise toll rates for PLUS-owned highways for the next five years with immediate effect.
"We believe that ownership by EPF and UEM will allow PLUS to improve its financial performance further"- SHAHRIL RIDZA RIDZUAN
EPF’s deputy chief executive officer (investment) Shahril Ridza Ridzuan said in a statement that the deal offered EPF an opportunity to acquire a “mature, cashflow-generating asset with an attractive risk-return profile, which would provide stable returns for our contributors’ retirement savings.”
He added: “We believe that ownership by EPF and UEM will allow PLUS to improve its financial performance further.”
According to Datuk Izzaddin Idris, chief executive of UEM, “PLUS, which is the fifth largest expressway operator in the world, is a key national asset. Expressway development and management remains one of UEM’s core focus areas and UEM will continue to leverage PLUS’ track record for its international growth plans.”
The deal proposes that PLUS pays out the cash proceeds from the sale to its shareholders via a special dividend and capital reduction.
Datuk Izzaddin Idris says PLUS is a key national asset
The EPF already owns 12.3% in PLUS, while Khazanah controls 56% of the highway operator.
As both the EPF and Khazanah will not be voting on the deal, minority shareholders will have to decide on it. As the takeover is via an acquisition of assets route, in accordance with the Companies Act, only a simple majority of PLUS shareholders (other than EPF and Khazanah/UEM) will suffice to get the deal done.
The price of RM4.60, however, represents a mere 3% premium over the last traded market price of PLUS and 1.7% below the average analysts target price of RM4.68, based on Bloomberg data. To be sure, PLUS’ share price has been steadily rising due to speculation of the takeover to reach a high of RM4.46 on Wednesday from a low of RM3.20 on May 27. It was suspended on Thursday morning for two days and will resume trading on Monday.
Some analysts reckon that the offer price is too low and therefore are advising shareholders not to vote for the deal. “The RM4.60 share price is a bit disappointing. It represents a mere 3% above the last traded price of PLUS and 5% below our target price. A price of between RM4.80 and RM5 per share would have been more reasonable,” said OSK analyst Jeremy Goh.
A similar view is shared by Kenanga Investment Bank Bhd research head Yeonzon Yeow, whose target price for PLUS is RM5.08, and therefore, he advised clients not to accept the offer.
After Khazanah and PLUS, the third largest shareholder in PLUS is Kumpulan Wang Persaraan with 5.54%. Other shareholders are mainly institutional funds such as BlackRock Fund Advisory, Vanguard Group, Credit Suisse Asset Management, Fidelity International and CIMB-Principal Asset Management.
PLUS said it would appoint the relevant advisers in due course and deliberate on the terms of the offer and decide on the next course of action. “An announcement will be made once the board has made a decision on the offer,” it said.
Prior to this offer, there were two proposals to take over PLUS, one by MMC Corp Bhd and another by private company Asas Serba Sdn Bhd.
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