Agenda Daily


Despite endorsement by the Prime Minister and the Deputy Prime Minister, the proposed merger between newspaper stalwarts Utusan Melayu and The New Straits Times Press came to a halt,courtesy of a large segment of Malaysians speaking up.


By A Kadir Jasin

it was easily the longest 45 days in the history of utusan Melayu (M) Bhd and The New Straits Times Press (M) Bhd (NSTP) in recent times. And they were also a period of great discomfort for Umno.

It started on Dec 4 last year, when Utusan Melayu and NSTP made a surprise announcement to Bursa Malaysia that they had commenced negotiations on a possible merger.

The Prime Minister and Umno President, Datuk Seri Abdullah Ahmad Badawi, immediately and publicly declared his support. Understandably, the plan also received the blessings of his deputy, Datuk Seri Mohd Najib Abdul Razak.

Almost immediately, too, the proposal started to receive objections from a wide spectrum of the Malay community, starting with several independent members of the Utusan Melayu board.

They were not convinced that the merger was to the benefit of the venerable newspaper group and warned that it might not go down well with Umno members.

The ruling party on its own and in collaboration with friendly parties controls 50% of the counter.

They should know better because they were appointed to the board to represent the party and are themselves influential members of the party.

That immediately put them at loggerheads with Abdullah and Najib, who had given their endorsement to the proposal. The proposal came about when the Utusan Melayu management met Abdullah to tell him of the company’s rather large capital requirement.

It is understood that Utusan Melayu needs nearly RM100 million to upgrade its printing presses and redevelop its Jalan Chan Sow Lin headquarters in Sungai Besi, Kuala Lumpur.

The fear of the Utusan Melayu directors was proven right when, a few days later, the majority of the members of the Umno Supreme Council expressed their reservations at the council’s monthly meeting.

This was followed by objections from Umno members at large, the journalists of the group and the Malay community in general who feared that the merger would compromise the uniqueness of Utusan Melayu and its newspapers.

Their biggest fear was that the smaller and more conservative Utusan Melayu might be manipulated by the larger and savvier NSTP. This was made worse by the fact that there exists a kind of distrust between a large segment of the Umno leadership and the current management of NSTP.

What took place clearly shows that the combination of the Supreme Council’s objection and the behind-the-scenes lobbying by Utusan Melayu journalists effectively killed the merger proposal despite the endorsement by Abdullah and Najib.

Abdullah’s and Najib’s confidence in the virtues of merging the two Umno-linked newspaper groups was clearly not shared by the majority of Umno leaders and members.

Thus, the Jan 18 announcement that ‘after a series of discussions, Utusan and NSTP were not able to reach a scheme of merger that would be beneficial to both parties and its stakeholders (and) accordingly, both groups have decided to terminate any further discussions on the proposed merger’ was merely to satisfy the market requirement.

While Umno members, the Malays, Utusan Melayu journalists and subscribers might be pleased with the cancellation of the merger plan, investors are not. The shares of both companies, which had risen substantially since the Dec 4 announcement, took a beating when the cancellation was announced.

Ironically, much of the debate for and against the merger took place neither in the newspapers involved nor in the rest of the mainstream media but in the alternative newspapers, the Internet news sites and weblogs (blogs).

Their reason for being silent or sparing is obvious. The merger proposal had put the Prime Minister and the Deputy Prime Minister at loggerheads with the majority of Umno leaders, who opposed the move.

The fear that the Utusan Melayu group and its flagship newspaper, Utusan Malaysia, might be compromised is not unfounded. In recent years, many iconic names associated with the Malays and Bumiputeras have disappeared as a result of mergers and takeovers, with the latest being Bank Bumiputra.

Bank Bumiputra, which came into being during the later part of Tun Abdul Razak Hussain’s era, was one of the landmark institutions of the New Economic Policy (NEP).

Ironically, the name Bumiputra disappeared as a result of a highly celebrated banking M&A exercise engineered by Abdul Razak’s own son – Datuk Mohd Nazir — the Executive Director and Group Chief Executive of CIMB Group. The term ‘Bumiputra’ disappeared when the Bumiputra-Commerce Bank Bhd had its name changed to CIMB Bank Bhd.

The truth about mergers

IT is not surprising, therefore, that the Malaysian public, including the otherwise passive Bumiputeras, are becoming more concerned with the outcome of mergers and acquisitions, especially when they involve such iconic companies as Sime Darby Bhd, Golden Hope Plantations Bhd and Kumpulan Guthrie Bhd.

Not least that the mega-merger of the three plantation-driven companies involves millions of shareholders by virtue of them being key investments of Permodalan Nasional Bhd (PNB).

The fact that the merger is being driven by an outside party — CIMB — may have satisfied the investing public, but it has done little to allay the fears of the Bumiputeras in general.

To them, the exercise gives the impression that PNB is selling its core assets to an obscure private company called Synergy Drive.

So, they ask: Whose company is Synergy Drive? Why must PNB sell its assets to a private company? What will happen to the Bumiputera ownership of these companies?

Given the prevalence of rumours and the inability of the authorities – both official and private – to explain themselves clearly and convincingly, conspiracy theories abound.

Inevitably, the names of the usual suspects are bandied about as the beneficiaries of this billion-ringgit deal.

They could still be the beneficiaries – may be not in terms of ownership but by way of fees and commissions that they can make by playing the role of intermediaries.

According to a businessman who is familiar with M&A exercises, CIMB alone stands to earn in excess of RM200 million in fees from the merger.

Understandably, both PNB and CIMB are limited by the various non-disclosure agreements and corporate regulations in the degree to which they can explain the merger.

The questions often asked include: Why had PNB chosen not to implement the merger itself, and what will happen to the non-plantation assets of the three companies? What is the future of the other PNB companies, which are suspended from Bursa Malaysia? How much shares will PNB hold in the merged entity?

Will Bumiputera shares be higher or lower? What will happen to the staff of the affected companies? If Synergy Drive or Sime Darby is to become a giant plantation company, why was a non-planter appointed as interim head? Will the interest of minority shareholders be sufficiently protected?

Of course, the biggest fear among those who are conversant with this type of exercises is asset stripping. What guarantee is there that some well-heeled, highly favoured persons or companies would not bid for or be offered non-core assets of the three companies and their subsidiaries?

These companies have not one but easily hundreds of small subsidiaries and operating units that may be worth a few million ringgit each, which will certainly be attractive to these well-heeled and favourably placed corporate raiders.

And there’s nothing to stop those whose power holds sway on the M&A exercise to time its completion to coincide with the coming general election when large amounts of IPO shares can be released to perk up the performance of the local bourse and line the pockets of power brokers and political operators.

It is reasonable to expect PNB to want the non-plantation assets of the three companies and their subsidiaries to be regrouped and re-listed for immediate capital gains as well as for long-term income flows.

Corporate copping out

THE less-than-favourable public reaction to the proposed merger between Utusan Melayu and NSTP and the concern over the merger of PNB companies must also have something to do with earlier corporate debacles.

One was the sale of Pantai Holdings Bhd to Singapore-based Parkway Holdings Limited, and the other was the acquisition of the larger government-controlled Avenue Capital Resources Bhd by the smaller publicly owned ECM Libra Bhd over a year ago.

The sale of Pantai Holdings has since established itself as a classic case of oversight by the entire corporate regulatory machinery of the government, including the Finance Ministry.

After months of silence and denial, the Prime Minister, who is also in charge of the finance portfolio, finally acknowledged that the control of Pantai Holdings and its privatised units – Fomema and Pantai Medivest – had fallen into foreign hands.

He ordered the state investment company Khazanah Nasional Bhd to solve the ownership issue of Fomema and Pantai Medivest, which conducts health screening of foreign workers and provides maintenance services to government hospitals respectively.

In October, Khazanah announced the completion of the share sale agreement to acquire a substantial stake in Pantai Holdings and the establishment of a joint venture with Parkway as a way of solving the ownership issue of Fomema and Pantai Medivest.

Media reports valued Parkway’s shares at RM394.9 million as opposed to the RM312 million that it had paid to acquire the controlling stake from Datuk Lim Tong Yong in August 2005.

Little or nothing has been heard about the deal since. More recently, however, there was talk that Fomema and possibly Pantai Medivest might be taken private. Pantai Holdings has already been delisted from Bursa Malaysia.

It is not clear whether they will be held ‘privately’ by Khazanah, sold to a private entity or merged with other Khazanah-linked healthcare companies like Faber Medi-Serve and Pharmaniaga.

Fomema and Pantai Medivest are highly profitable, thanks to lucrative long-term government contracts.

In an unrelated development, a local company linked to one of the non-Bumiputera partners of a nasi kandar restaurant in Australia is understood to have won a Malaysian Government contract to carry out health screening similar to that of Fomema, but with a catch. It has to carry out the screening in Indonesia for Indonesian workers coming to Malaysia.

Located in Perth, Puteri Nasi Kandar was officially opened by the Prime Minister on Dec 29. It is partly owned by Abdullah’s entrepreneur brother Datuk Ibrahim.

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