UEM, EPF offer RM23b for PLUS

The deal could be Malaysia's largest merger and acquisition since Sime Darby's RM31.4 billion mega-merger in late 2007.



TWO state-owned companies, UEM Group Bhd and pension fund Employees Provident Fund (EPF), announced a RM23 billion takeover offer for highway operator PLUS Expressways Bhd (5052) late yesterday.

The deal, which works out to RM4.60 a share, could be the country's largest merger and acquisition since Sime Darby Bhd's RM31.4 billion mega-merger in late 2007.

The offer was made for PLUS' asset and liabilities, UEM and the EPF said in a joint statement.

The announcement came after Prime Minister Datuk Seri Najib Razak disclosed in his Budget 2011 speech yesterday that there would be no toll rate hikes on four highways owned by PLUS for the next five years.
The four highways are the NSE, Elite, Linkedua and Butterworth-Kulim Expressway.

Analysts said the offer price is fair and believe that minority shareholders will go for it.

"It's actually quite fair and close to our fair value price of RM4.70. We don't think there'll be any strong objection from minority shareholders," said Wong Chew Hann, an analyst that tracks PLUS' shares at Maybank Investment Bank Research.

PLUS is the concessionaire for most of the highways in the country, including the heavily-used North-South Expressway (NSE) and the North Klang Valley Expressway.

A co-investment vehicle will be set up to take over PLUS' business, with UEM holding a 51 per cent stake in it and EPF, the remaining 49 per cent.

After the buyout, a special dividend will be paid out to minority shareholders and PLUS will be delisted.

PLUS, in a statement to the stock exchange, said its board would appoint relevant advisers and decide on the next course of action.

Other parties that had been vying for PLUS included privately-owned Asas Serba Sdn Bhd. MMC Corp Bhd, owned by tycoon Tan Sri Syed Mokhtar Al-Bukhary, had also put in a proposal for UEM Group.

The deal yesterday is seen to be motivated by the government's need to balance "a reduction in toll subsidies against public dissent on toll rate hikes", said an analyst from ECM Libra Investment Research.

"We believe an exercise to acquire PLUS would involve more manageable toll rates post-takeover," the analyst wrote in a report yesterday.

Under the present concession agreement, toll operators are allowed scheduled rate hikes. If the government decides against a rate hike whenever one is scheduled in a particular year, it has to compensate the toll operator.

UEM and EPF said their takeover offer is subject to a successful restructuring of the concession agreement.

UEM Group managing director Datuk Izzaddin Idris said if the bid is successful, PLUS would continue to be run by the same group of professionals.

Meanwhile, the EPF deputy chief executive officer for investments Shahril Ridza Ridzuan said ownership by EPF and UEM will allow PLUS to improve its financial performance.


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