The move is aimed at monetising the intangible asset represented by AirAsia brand 

by RUPINDER SINGH / pic BLOOMBERG

CAPITAL A Bhd has proposed the listing of its unit, Capital A International (CAPI), which holds the license for the AirAsia brand, on Nasdaq. 

The proposed valuation for this listing is reported to be US$1.15 billion (RM5.4 billion). 

This strategic move is aimed at monetising the intangible asset represented by the AirAsia brand and plays a crucial role in Capital A’s regularisation plan to lift itself out of the PN17 status. 

On Feb 28, Capital A entered into a letter of intent with Atherium Acquisition Corp (GMFI), a special purpose acquisition company (SPAC) listed on Nasdaq. 

This set the stage for a proposed business combination between GMFI and CAPI. 

The latter will serve as the manager and licensor of the AirAsia brands, merging with GMFI to list on the US exchange at a valuation of US$1.15 billion. 

The AirAsia brand, currently housed under Capital A’s wholly owned subsidiary Brand AA Sdn Bhd, will be transferred to CAPI as part of this transformative move. 

The transaction involves the acquisition of CAPI by GMFI, resulting in CAPI becoming a publicly listed entity on Nasdaq. 

The completion of this deal is expected by the first quarter of 2025 (1Q25). 

The move is designed to monetise Capital A’s intangible asset, the AirAsia brand and plays a pivotal role in its regularisation plan to lift the company out of the PN17 status. 

Capital A plans to distribute a 47.9% stake in the merged entity to its shareholders

However, this exercise will not materially alter the company’s fundamentals. 

The AirAsia brand’s valuation, ranging from US$1.01 billion to US$1.3 billion, was determined through an independent valuation conducted by Brand Finance plc, a reputable brand valuation consultancy. 

The proposed deal involves CAPI merging with GMFI, and as a result, Capital A will receive 94% of the enlarged share capital in the merged entity or CAPI, valued at US$1 billion. Capital A plans to distribute a 47.9% stake in the merged entity to its shareholders, leaving Capital A and its shareholders with 46.1% and 47.9% stakes in CAPI respectively. The remaining 6% will be held by existing Atherium shareholders. 

Brand AA, the entity holding the rights to collect royalty fees from AirAsia Aviation Group Ltd (AAAGL), will undertake a US$150 million term loan currently held by Capital A’s unit, Asia Aviation Capital Ltd (Labuan). 

CAPI is poised to become a new investment and strategic development company, leveraging the globally recognised AirAsia brand. 

Its focus will capitalise on core capabilities in aviation, travel, hospitality and digital technologies. 

As a standalone publicly traded company in the US, CAPI is expected to play a key role in the group’s future endeavours. 

For illustration purposes, Capital A’s total negative shareholders’ equity as of Sept 30, 2023, is expected to reduce from RM10.5 billion to RM6 billion following the proposed Brand AA disposal. 

In a note last week, Kenanga Investment Bank Bhd (Kenanga Research) maintains its existing forecasts, valuations, and a “market perform” call pending the completion of the listing. 

The research house forecasts and valuations were fine-tuned, with a 7% reduction in the target price to 78 sen from 84 sen. 

“Looking further into CY24, we see project Capital A’s system-wide revenue seat km (RPK) to grow 20% to an estimated 70 billion in CY24, after recovering by an estimated 24 billion to 58 billion in FY23 based on our forecasts,” Kenanga Research said. 

It added that the investment case for Capital A remains positive, driven by its anticipated recovery in air travel post-pandemic, a growing digital business and dynamic leadership. 

However, the report highlights risks, including a potential stall in air travel recovery, sustained high jet fuel prices, challenges in lifting PN17 status and persistent cash burn in digital assets. 

• This article first appeared in The Malaysian Reserve weekly print edition