Friday, October 15, 2010

EPF, Khazanah to buy out PLUS in RM23b deal

October 15, 2010

KUALA LUMPUR, Oct 15 — Two state linked funds will buy out highway operator PLUS Expressways for at least RM23 billion, the largest deal in Malaysia so far.

A source with direct knowledge of the deal told Reuters the deal will be sealed at between RM4.60 to RM4.80 a share. In today's edition, The Edge Financial initially quoted their own sources saying that the Employees Provident Fund (EPF) and state investment arm Khazanah Nasional will form a special purpose vehicle (SPV) to take over the assets and liabilities of PLUS at RM4.60 per share.

EPF already owns a 12.3 per cent stake and Khazanah holds 55.2 per cent of the firm that operates the lucrative North-South highway running from the northwestern tip of Malaysia to Singapore.

PLUS Expressways has been the subject of privatisation talk and such a move would follow a decision in July by Malaysian billionaire Ananda Krishnan to take oil and gas firm Tanjong Offshore private.

The Edge said the SPV will restructure the toll operator’s debt to match its cash flow. In the 2009 financial year ending Dec 31, net operating cash flow stood at 2 billion ringgit and long term debt at RM8 billion.

“Its cash flow is enough for PLUS to undertake more borrowings. And EPF is in need of long-term debt papers,” the Edge quoted one of the sources as saying.

Officials from EPF, Khazanah and PLUS were not immediately available for comment.

Shares in PLUS were suspended for two days yesterda pending an announcement from a shareholder.

PLUS shares have jumped about 37 percent so far this year, closing on Oct. 13 at 4.46 ringgit.

Prime Minister Datuk Seri Najib Razak is expected to make some mention of the deal when he presents the country’s budget later today, according to local media reports.


Analysts were divided about the implications of a possible deal.

“EPF taking over PLUS would make it easier for Malaysian citizens to accept toll hikes,” said OSK analyst Jeremy Goh.

Others were less bullish saying the privatisation of PLUS would reduce liquidity and diversity in a market that has been struggling to lure in foreign investors.

“The key thing is that investors will have to look for alternative yield plays,” UOB Kay Hian Head of Research Vincent Khoo said.

“Bear in mind that this has not been the only privatisation this year. The privatisation of Tanjong also created the same issue. Second liner yield plays, such as KLCC could benefit.”

But the volume removed from the bourse will be replaced by the upcoming IPOs of two Petronas subsidiaries, Malaysia Marine and Petronas Chemicals, analysts said.

Thomson I/B/E/S estimates PLUS to earn RM1.27 billion in the 2010 financial year and to return 0.19 ringgit a share in the form of dividends to shareholders.

PLUS is on track to meet the net profit estimate after posting a net profit of RM618.7 million for the six months ended June 30. It declared total dividends of RM0.075 per share for the same time period. — Reuters

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