M&A deals set to rise in Malaysia

PEC M&A values hit a record value at RM2.2t for the 1st 6 months of 2021, compared to RM1.2t last year 

By ANIS HAZIM 

MERGER and acquisition (M&A) activities in Malaysia are expected to mirror the growth trends seen globally albeit lagging behind, driven by rising needs for transformation to ensure a sustainable future post-pandemic, according to EY (Ernst & Young). 

EY Malaysia strategy and trans-actions leader Preman Menon said the Covid-19 pandemic has accelerated the need for Malaysian businesses to review and realign their strategy and formulate their transformation journeys for the future. 

“While plans and growth trajectory vary by sector, EY observes common themes centring around transformation, agility and sustainable growth. 

“In line with this, we believe that M&A activity will feature as companies look to acquire technology and skillsets, favouring ‘Buy’ versus ‘Build’,” Menon said in a statement yesterday. 

Year-to-date, Malaysia has seen several notable M&As including Hibiscus Petroleum Bhd’s acquisition of Repsol Exploración SA’s upstream assets in Malaysia and Vietnam; Kuala Lumpur Kepong Bhd acquisition of IJM Plantations Bhd from IJM Corp Bhd; and the purchase of 30% in Loob Holdings Sdn Bhd by private equity firm, Creador. 

In a statement yesterday, Scientex Bhd proposed to acquire, in cash, all the remaining shares and war- rants of Daibochi Bhd that it does not already own, at an offer price of RM2.70 per share and 32 sen per warrant, amounting to RM345.3 million in total. 

Scientex said the proposed privatisation of Daibochi will provide the group with greater flexibility and autonomy to rationalise its business activities and to streamline the operations of both Daibochi and the enlarged Scientex group of companies, to achieve greater operational efficiencies to grow the flexible packaging business. 

Scientex CEO Lim Peng Jin (picture) said the challenges presented by the pandemic highlight the growing needs of companies to be agile to react fast to external impacts, especially for Daibochi that serves the supply chains of essential food and beverages, and fast-moving consumer goods segments. 

“To ensure uninterrupted supply to customers, it is crucial to future-proof Daibochi’s capabilies through implementation of risk mitigation and business continuity plans that are integrated with Scientex’s resources and internal processes. 

“This will enhance Daibochi’s competitive edge and resilience, as well as reinforce the confidence among its multinational companies and local prominent brands,” Lim noted in a statement yesterday. 

He said the cash offer provides an opportunity to Daibochi’s shareholders to realise their investments immediately. 

Daibochi could also leverage on Scientex’s facilities and market access globally. 

Meanwhile, kitchen cabinet manufacturer Signature International Bhd has also entered a proposed disposal with Ace Logistic Sdn Bhd for a total cash consideration of RM54.57 million, according to an exchange filing yesterday. 

The group said its wholly-owned subsidiary Signature Realty Sdn Bhd entered into three conditional sales and purchase agreements with Ace Logistic for three vacant freehold lands in Negri Sembilan. 

Asia Pacific (APEC) M&A values hit a record value at US$535 billion (RM2.22 trillion) for the first six months of 2021, compared to US$284 billion in the same period last year as markets begin to revive from the Covid-19 pandemic. 

EY said cross-border transactions have staged an impressive comeback with nearly three times year-on-year (YoY) growth to US$159 billion, despite many parts of the global economy still operating under restrictions. 

“The pandemic has propelled innovation and significant business transformation across all industries. In the tech sphere, M&A activity in APEC has been fuelled by the emergence of next-gen technological applications, such as industrial Internet of Things, artificial intelligence, electric vehicles and sustainable, fuel-efficient technologies,” EY Asia-Pacific strategy and transactions leader Mak Yew-Poh said in the statement yesterday. 

For advanced manufacturers who pursued M&A, Mak stated that the primary activity has been bolt-on acquisitions in the same sector designed to increase market share or transformative deals that would enable a more sustainable business model. 

EY noted that more than 50 deals valued over US$1 billion were announced targeting Asia Pacific so far this year, increasing by almost five times YoY. 

The technology sector continues to lead deals with 28% of the cumulative deal value in the first half of 2021 (1H21). 

Advanced manufacturing and mobility sectors were the subsequent most active in terms of deal activity. 

The outbound value in Asia- Pacific jumped 170% to US$85 billion in pre-Covid-19 levels, while the inbound value reached a historical high at US$74 billion. 

M&A in the renewable energy sector globally has also jumped to US$96.5 billion in 1H21, compared to US$35.7 billion last year, as CEOs look to meet ambitious environmental targets through transactions.