Med-Bumikar’s MBM stake sale can lead to backlash from Perodua shareholders

The proposed share sale may put Med-Bumikar into a delicate position with Daihatsu Motor

By RAHIMI YUNUS / Pic By TMR File

Med-Bumikar Mara Sdn Bhd could find itself breaching its legal undertaking with venture partners in Perusahaan Otomobil Kedua Sdn Bhd’s (Perodua) if it accepts the RM2.56 sen a share offer tabled by UMW Holdings Bhd to acquire Med-Bumikar’s 50.07% stake in MBM Resources Bhd.

The proposed share sale is backed by Med-Bumikar’s largest institutional shareholder Majlis Amanah Rakyat (Mara), but could put Med- Bumikar into a delicate position with Daihatsu Motor Co Ltd of Japan, the principal partner in Perodua.

“Med-Bumikar has a legal undertaking with Daihatsu, Mitsui Group and other shareholders of Perodua that the company will always be related to MBM, which would no longer be the case after the sale.

Mara’s move puts Med-Bumikar in breach of a legal undertaking with Daihatsu,” an industry source told The Malaysian Reserve (TMR).

At Med-Bumikar’s recent EGM last week, two resolutions were passed after deliberation by those present, namely Mara and five members from the Wong and Looi families, while dissenting shareholders staged a walkout.

The first resolution was the acceptance of UMW’s offer to acquire 50.07% equity interest in MBM, held by Med-Bumikar Mara and Central Shore Sdn Bhd (CSSB).

The second resolution was the appointment of Muhamad Zaki Jali and Wong Fay Lee as directors.

“Mara realises the possible ramifications and despite that, wants to accept the offer. Mara called on the board to further deliberate on the matter and wants UMW to increase the offer price. It is a bit contradicting,” the source said.

The MBM takeover will give UMW an additional 20% stake in Perodua.

UMW also wants to buy PNB Equity Resource Corp Sdn Bhd’s (PERC) 10% stake in Perodua for RM417.5 million, which would give UMW a total of 70% stake in Perodua.

Perodua is Malaysia’s largest carmaker in terms of market share (35% in 2017) and was established in 1993 as a joint-venture (JV) company between Malaysian and Japanese partners.

Perodua’s shareholders now are UMW (38%), MBM (20%), PERC (10%), Daihatsu (20%), Daihatsu (M) Sdn Bhd (5%), Mitsui Group (4.2%) and Mitsui & Co (Asia Pacific) Pte Ltd (2.8%).

The source said UMW could have asked MBM to sell its stake in Perodua to it and by that way, Daihatsu could not do anything to block the acquisition since the sale is directly by MBM.

“Existing shareholders in Perodua have the first right of refusal should shareholders intend to sell a stake.

Considering the sale of 30% stake held in total by PERC and MBM, the venture partners would have the right to buy a portion. Daihatsu might not be happy about it, but they cannot stop the sale,” the source said.

“Now, someone is being greedy and wanting a 70% stake in Perodua. How could the Japanese agree to that? They can take an injunction to stop Med-Bumikar from selling its stake in MBM,” the source added.

TMR had contacted Mitsui Group on the proposed acquisition, but the Japanese company is staying tightlipped on the matter.

To recap, UMW on March 9 tabled an offer to Med-Bumikar and CSSB to buy their 50.07% combined stakes in MBM for RM501 million, or RM2.56 per share, which values MBM at about RM1 billion.

The offer price was at a 30% discount of MBM’s net tangible asset per share value of RM3.68.

UMW has extended its offer period for the proposed acquisition to Oct 31, 2018, from its initial date of April 30.