DRB-Hicom denies ‘Proton stake disposal’

Responding to a report by a Malaysian business weekly last weekend, the group said that it remained committed to holding a substantial and strategic stake in Proton and remained confident of the carmaker’s turnaround.
“It must be highlighted that as part of the requirement of the 1.5 billion ringgit (US$371.75 million) loan granted by the government, Proton is currently … seeking a partner to Proton who can provide a strategic, operational and cultural fit on a permanent basis, with the intention of growing its automotive business.
“This exercise is expected to be completed in the first quarter of 2017 and its implementation is being overseen by the Task Force Committee formed by the government to monitor the turnaround of Proton,” it said in a filing with the stock exchange.
The loan was provided to Proton as part of a conditional share subscription agreement that was announced in June as a cash injection for the loss-making carmaker.
Under the arrangement, the government agreed to subscribe to 1.25 billion new redeemable convertible cumulative preference shares (RCCPS) at an issue price of 1 ringgit each.
Should the RCCPS be fully converted, the government will end up owning a 79.28 per cent stake in Proton. This potential outcome could prove to be a stumbling block should DRB-Hicom choose to arrange a deal with foreign investors.
As part of the RCCPS subscription agreement, Proton is currently seeking a partner who will assist in research and development to restore its competitiveness in Malaysia’s automotive industry.
According to the deal, parties involved in the agreement will seek alternative solutions should Proton be unable to find a partner by June next year.
DRB-Hicom’s shares rose to a seven-month high yesterday as buying interest continued to pick up since last week. The stock peaked at 1.24 ringgit per share before paring down the gains to close at 1.16 ringgit, or a five-sen gain from last Friday’s close.
DRB-Hicom has made numerous attempts since last year to consolidate its business interests.
While a proposed merger between its subsidiary Bank Muamalat Malaysia Bhd and Malaysia Building Society Bhd fell through in February, DRB-Hicom currently plans to inject its logistics assets into Pos Malaysia Bhd in a share deal that could see its 32 per cent stake in the postal services company rise further.
Elsewhere, its subsidiary Hicom Megah Sdn Bhd entered into an agreement on August 3 to dispose of its 90 per cent stake in Singaporean property firm Corwin Holding Pte Ltd. Terms are still being finalised.