Yup, it's written by that Jose Barrock!
- Proton to divest Edar to EON
Written by Jose Barrock & Surin Murugiah
Tuesday, 21 April 2009 10:49
KUALA LUMPUR: In a move that could kick-start the consolidation of the fragmented automobile industry in the country, national carmaker Proton Holdings Bhd is looking to inject its distribution arm, Proton Edar Sdn Bhd, into Edaran Otomobil Nasional Bhd (EON).
The exercise, expected to be announced next month, will consolidate the distribution arm of the national carmaker into EON.
Sources said that Proton will get EON shares in return for divesting Proton Edar. This would result in both Proton and DRB-Hicom controlling the distribution of the national automaker’s vehicles.
It also effectively puts EON back to its original position as the sole distributor and authorised servicing agent of the national car.
It is not clear how much equity Proton will end up having in EON. At the moment, DRB-Hicom controls 79.05% of EON while Kualapura Sdn Bhd, the private vehicle of Rin Kei Mei, holds 12.1% in the auto distributor.
Rin is the founding member of EON and has a substantial stake in EON Capital Bhd. Despite DRB-Hicom offering a general buyout of EON in August 2007, Rin has stayed firm in not accepting the offer, which has been a stumbling block for DRB-Hicom to take EON private.
This exercise is also said to be part of a bigger plan to consolidate the various auto distribution and manufacturing arms in the country. Speculation is rife of a possible merger between Proton and Perusahaan Otomobil Kedua Sdn Bhd (Perodua).
The government’s investment arm, Khazanah Nasional Bhd, has a 42.7% stake in Proton while UMW Holdings Bhd, a company where Permodalan Nasional Bhd (PNB) has 53%, is the largest shareholder in Perodua with 38% equity.
The second largest shareholder of Perodua with 20% is MBM Resources Bhd, which is also a government-controlled entity. The other shareholders of Perodua are Daihatsu Motor Co Ltd (20%), PNB Equity Resources (10%), Mitsui & Co (7%) and Daihatsu (M) Sdn Bhd (5%).
However, the Japanese parties — Daihatsu Motor Co and Mitsui — have 51% in the manufacturing arm, which has some insisting Perodua is not a national car project.
Proton Edar was established after Proton and EON went separate ways a few years ago after they failed to agree on several issues, including development cost incurred by Proton for new models.
However, Proton Edar quickly outpaced EON and now controls about 60% of the Proton showrooms and service centres in the country while EON has the remaining 40%.
“Proton has been beefing up its retail operations and brought in fresh blood to run its operations… getting it (retail operations) listed has always been part of the bigger plan,” said an auto industry official.
However, it is likely that the current plan will only be announced, and take effect after a memorandum of understanding signed between the two companies, Proton and EON, for the collaboration and rationalisation of distribution networks and service centres, expires next month.
Talk of DRB-Hicom taking equity in Proton has been making the rounds but a senior official of DRB-Hicom denied this.
At the moment, there are three manufacturers with national car status — Proton, Perodua and Naza Group. A consolidation among them makes sense as Proton and Perodua have more than 50% share of the market.
According to the Malaysian Automotive Association, the total number of vehicles sold last year was 548,115, out of which 30.5% were Perodua vehicles and 25.9% were Proton cars. Vehicle sales have been projected to fall by 12.4% to 480,000 units this year.
Proton’s shares surged to their highest level in seven months yesterday, closing 34 sen up at RM2.99, while DRB-Hicom mirrored Proton’s performance and gained 22.5 sen to RM1.08, its highest level since May last year. Strangely, EON’s shares were not traded and ended unchanged at 58.5 sen.
DRB-Hicom’s trading volume surpassed the 25 million mark, while Proton’s breached three million shares.
Apart from the consolidation speculation, the surge in Proton’s share price is also due to it being long under-valued. Its net asset per share stood at RM9.81 as at end-2008.
With such a sexy story told by this SOURCES, how can DRB-Hicom shares not fly!!!
ps: I wonder what will happen to the stock if this story is denied by Proton.
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