By Emmanuel Samarathisa

CONCERNS over potential regulatory issues pertaining to related party transactions (RPTs) are surfacing in the RM6.2 bil sale of four highway concessionaires linked to Gamuda Bhd that the government is proposing to acquire. 

Singapore’s The Straits Times, citing bankers, reported on Dec 2 last year that Bursa Malaysia Securities Bhd slapped “prohibitive conditions” on the major shareholders of the four toll concessions.

When queried by FocusM over issuing such “prohibitive” measures, Bursa Malaysia said it is not the bourse’s policy to comment on specific cases but affirmed its role in regulating RPTs under the Main Market Listing Requirements (MMLR). 

“In RPTs, an interested related party can and may exert significant influence over a listed issuer’s actions/transactions for their personal benefit which presents a risk of potential abuse to the listed issuer and its shareholders,” Bursa said in a Jan 6 emailed statement. 

People with knowledge of the matter also told FocusM that the local bourse had put out such conditions but added that “prohibitive” was too harsh a word. “It is more of safeguards so that minority shareholders are protected,” said a source. 

The government, through the Ministry of Finance, plans to take over four highway concessionaires that operate key intra-city expressways: publicly-listed Lingkaran Trans Kota Bhd (Litrak), Kesas Sdn Bhd, Sistem Penyuraian Barat Sdn Bhd (Sprint) and Syarikat Mengurus Air Banjir dan Terowong Sdn Bhd (Smart). 

Gamuda holds significant stakes in each concessionaire: 44% in Litrak, 52% in Sprint, 70% in Kesas and 50% in Smart. 

Meanwhile, Gamuda’s shareholders include government-linked investment companies Permodalan Nasional Bhd (PNB) with 16.4%, Employees Provident Fund (EPF) with 12.64% and Kumpulan Wang Persaraan (Diperbadankan) with 6.96%, as well as MoF special purpose vehicle (SPV) Urusharta Jemaah Sdn Bhd with 3.66%.

Litrak, on the other hand, is majority-owned by Gamuda (43%). Other significant shareholders are PNB (22%), EPF (5.95%) and Urusharta (3.15%).

MoF made its takeover gambit in June but it was only during Finance Minister Lim Guan Eng’s tabling of Budget 2020 where the sale was confirmed. The proposed acquisition will be done through a special purpose vehicle (SPV) wholly owned by MoF Inc. The SPV will fund the RM6.2 bil offer through government guarantees. 

According to Bursa, a “related party” included the director or major shareholder. “Hence, transactions that are entered into by the listed issuer or its subsidiaries which involve the interest of a related party must ensure compliance of the provisions under the MMLR,” it said. 

Measures include: empowering independent shareholders to approve or reject material RPTs.

“In this connection, interested/conflicted major shareholders are required to abstain from voting. This is to eliminate the risk of such shareholder which has significant influence over the listed issuer (including through its voting power at shareholders’ meeting) to leverage on its ability to influence the listed issuer or subsidiaries for its personal advantage/benefit, and to the detriment of the listed issuer and its other shareholders,” Bursa said. 

The regulator also requires that an independent adviser be appointed “to opine whether the RPT is fair and reasonable” so that minority shareholders are protected.

Finance Minister Lim told reporters on Dec 31 the Cabinet might come to a decision on the highway takeovers, including that of PLUS Malaysia Bhd, this week. – Jan 2, 2020

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