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Maju insists PLUS bid still on the cards
Khairul Khalid 
Maju Holdings' offer to buy PLUS Highway includes freezing toll hikes for the next 20 years
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DESPITE statements by the government to the contrary, Maju Holdings Sdn Bhd says its bid to acquire PLUS Malaysia Bhd is not completely dead in the water.

Although the controversial proposal worth RM36 bil was said to be rejected by the government, the company tells FocusM it has not received any official response from PLUS’ shareholders two months after making its initial proposal.

The company is still leaving the door open for government negotiations and is adamant it has the funds for the deal. It says it has not been officially informed of any acceptance or rejection of the offer.

“The ball is in the court of the relevant parties. Everything is in place and we stand by our proposal which remains viable.

“Evercore Asia Ltd (Maju Holdings’ US-based financial adviser) has secured the funding for the offer.

“UEM Group Bhd and the Employees Provident Fund (EPF) are aware of it,” a spokesperson from Maju Holdings says.

 

Contradiction

However, its statement contradicts reports that Finance Ministry had rejected the offer.

During a parliamentary session in October, Prime Minister and Finance Minister Datuk Seri Najib Razak said in a written reply that the government had no plans to sell its stake in PLUS, the country’s biggest highway concessionaire, to Maju Holdings.

The statement said the government is uncertain the bid is supported by “clear and strong” sources of financing.

Moreover, it still considers the highway a backbone of the country’s road system and a strategic national asset.

It says it doesn’t want to risk having to bail out PLUS due to prevailing economic uncertainties.

When the bid was announced in September, it was submitted by Evercore to UEM and EPF on Maju Holdings’ behalf.

UEM, a wholly-owned unit of Khazanah Nasional Bhd, controls 51% of PLUS while the EPF holds the balance.

Sahid says he began exploring the PLUS takeover after a meeting with the Malaysian Highway Authority

Maju Holdings group executive chairman Tan Sri Abu Sahid Mohamad says the idea to take over PLUS began in the middle of the year after a meeting between the concessionaires and the Malaysian Highway Authority to discuss an increase of toll rates.

Immediately after the offer was made, UEM and EPF said in a joint statement they have no intention of selling their respective stakes in PLUS, but were reviewing the proposal.

 

Slim chances

A market observer expressed surprise at Maju Holdings’ claims that the offer is still alive. But he says he does not rule out slim chances that it could revive the bid.

“The deal was a non-starter from day one when EPF and UEM said they were not keen on selling. That was a strong indicator that it did not receive the government’s blessings.

“But you never know. There might be some last minute behind-the-scenes manoeuvring. The general elections are coming, so anything is possible,” he says.

PLUS has five concessions including Projek Lebuhraya Utara-Selatan Bhd. Under its umbrella are the North-South Expressway, New Klang Valley Expressway, Federal Highway Route 2 and Seremban-Port Dickson Highway.

Maju Holdings’ offer entails a RM4 bil cash equity purchase plus expenses. The indicative offer implies a total enterprise value of RM36 bil for PLUS.

“This indicative valuation provides the sellers with a rate of return of over 20% on their original investment of RM3.4 bil.

“This is exceptionally high in international terms for an infrastructure asset of this nature,” says Maju Holdings.

The company says it intends to transfer savings to the government and the public by freezing toll rates for the remainder of the concession period, thus saving road users from having to pay the projected 48% cumulative toll hike over the next 20 years.

Its proposal also includes improving and enhancing PLUS highways by lighting up the full length of the road and implementing measures to increase safety and security.

 

Efficiencies

Maju Holdings is touting its track record of operating MEX and claims it can improve operating costs for PLUS highways by enhancing efficiencies.

It says MEX is run three times more cost effectively compared to PLUS’ expressways.

The company also says it can unlock PLUS highway’s value by increasing revenue, and plans to invest around RM3 bil to improve the infrastructure.

The company previously said it is not opposed to the idea of EPF and UEM remaining stakeholders in the highway provided they agree to the sale.

The main core businesses of Maju Holdings are property development and construction, operating the Integrated Transport Terminal in Bandar Tasik Selatan (ITT) which is also known as Terminal Bersepadu Selatan (TBS), as well as the Maju Expressway (MEX) that links Kuala Lumpur city centre with the Kuala Lumpur International Airport in Sepang.

The 26km MEX is operated by Maju Holdings’ subsidiary, Maju Expressway Sdn Bhd, which has a 33-year concession commencing December 2004.

For the first few years, the company was losing money in MEX but since 2012 it has been in the black.

For FY16 ended Dec 31, Maju Holdings Sdn Bhd posted a loss after tax of RM60.02 mil on the back of RM512.89 mil in revenue.

It had total assets worth RM4.86 bil, total equity of RM484.65 mil and total liabilities of RM4.37 bil.

And for FY16 ended Dec 31, Maju Expressway Sdn Bhd posted a profit after tax of RM5.78 mil on the back of RM127.89 mil revenue.

It had total assets worth RM1.59 bil, total equity of RM55.92 mil and total liabilities of RM1.53 bil.

A chequered track record

Critics point to Maju Holdings Sdn Bhd group executive chairman Tan Sri Abu Sahid Mohamad’s tenure in the ill-fated Perwaja Steel as reasons against selling PLUS Highway Sdn Bhd to it.

In 1995, the government put the financially troubled Perwaja Steel up for sale, and Maju Holdings eventually emerged as its ultimate holding company in 2003, in a RM1.3 bil deal.

In 2005, Abu Sahid formed a joint venture with another steel producer, Kinsteel, which bought a 51% stake in Perwaja from Maju Holdings for RM197.6 mil in 2006.

However, Abu Sahid has firmly maintained that Perwaja was profitable during his time and he was responsible for its listing in 2008. He stepped down as the company’s chairman in 2013.

Perwaja was delisted in May after four years of being classified a Practice Note 17 company by Bursa Malaysia, denoting companies in financial distress.

Currently, Abu Sahid’s main listed entity is Ipmuda Bhd, in which he is a controlling shareholder with a 22% stake.

The company is in the businesses of trading and distribution of building materials.

Ipmuda’s business was linked closely to supplying materials for Perwaja Steel and it suffered as a consequence of the latter’s troubles.



This article first appeared in Focus Malaysia Issue 261.