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PLUS Malaysia Bhd Takeover: Is Maju Holdings Too Ambitious?

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I read with intrigue on September 12 about the offer made by Maju Holdings Bhd to take over PLUS Malaysia from UEM Group and the Employees Provident Fund (EPF).

According to media reports, Maju Holdings Bhd’s big boss Tan Sri Abu Sahid Mohamed was quoted as saying “I’m very, very confident of pulling it off. I have everything ready – I have the money, I have the blessing from the highest levels in the country, I have the advisers and bankers all ready, and I have the formula to do it.”

In another news report on the same day, UEM and EPF, the two shareholders of PLUS, said neither plans to sell their stakes in the tolled expressway operator to Maju Holdings.

“Interesting”, I thought.

Over the next two weeks news of the proposal has filled the pages of newspapers and online news portals. Tan Sri Abu Sahid has come on strong in expressing and reiterating his intentions to buy both the 51% stake held by UEM Group and the remaining 49% owned by EPF.

Equally, the naysayers have also spoken. There is even an online petition here where individuals opposed to this buyout claim that “Maju Holdings should not control or own something built with Rakyat’s money! No one individual should enjoy the profits from the highway system! Say no to the acquisition of PLUS Malaysia by any individual!”

The UEM Group and EPF took over the assets and liabilities of PLUS for RM23 billion in late 2011. In addition to that, to reduce the Government’s burden, UEM Group & EPF agreed to waive PLUS’ outstanding compensation balance amounting to RM2.9 billion. This is on top of the waiver of compensation due to PLUS as a result of a five-year toll freeze valued at RM3.6 billion. Can Maju Holdings stomach such waiver? In their proposal, Maju Holdings claimed to waive only RM900 million – a mere 13.85% of what UEM Group & EPF did.

However, this is not the first time an unsolicited buyout plan for PLUS was presented on the table. In 2014, a bid by a group linked to former Renong Berhad’s executive chairman Tan Sri Halim Saad was rejected by the government for giving incorrect information.

Bear in mind that PLUS is the largest tolled highway operator in Malaysia and one of the biggest in South East Asia. It has five concessions spanning almost 1,200km. All of PLUS’s concessions will end by December 2038. Again, this is nowhere near Maju Expressway’s 26km.

Yet Tan Sri Abu Sahid seems to be baffled as to why his proposal is receiving such negative public feedback.

First of all, there is growing anxiety as the sale of EPF’s stake will affect the 14.5 million EPF members who may lose out on the steady dividend income – whether they use PLUS interstate or urban highways, or not. As an institutional investor, EPF’s domestic choice is severely limited; disposing of PLUS equity means that the EPF would lose its valuable income from this strategic investment and as a result, contributors would no longer get good dividends enjoyed year after year until 2038.

Yes, the sale will provide EPF an immediate RM137 per EPF member. True, this is almost 5 times the RM27.50 per annum EPF members enjoy. EPF is an institution with a long-term investment horizon. Since PLUS’ concessions end in in 2038, there is about 20 years left. Is it wise or prudent to accept the RM137 in lieu of a possible RM550?

We turn our attention to UEM Group. UEM Group is a wholly owned subsidiary of Khazanah Nasional and holds a 51% stake in PLUS. UEM Group dividends are paid to Khazanah. Khazanah can, in turn, benefit the people through the government’s infrastructure development plans.

In this sense, PLUS, in a way, belongs to the people. PLUS represents a core business for Khazanah and a core investment for EPF. PLUS is their golden goose. Should it be slaughtered now for immediate gains?

Analysts opined that Tan Sri Abu Sahid’s proposal should be rejected as both Khazanah and EPF enjoy good returns since 2011.

Another concerned raised is the effect of Maju Holding’s total acquisition of PLUS: should a national asset that belongs to the people be controlled by a private company?

Some quarters also question Tan Sri Abu Sahid’s track record. An anonymous market watcher asks, “Do you think he can pull it off? His track record is questionable. What happened at Perwaja? Is he biting off more than he can chew?”

Let’s have a closer look at his “track record”.

Tan Sri Abu Sahid is known to be a protégé of the late Tan Sri Eric Chia, and an alleged crony of former prime minister Tun Dr Mahathir Mohamad. Now many may not know his name today, but Eric Chia was a household name in the 90s. In 2004, Eric Chia was among those stripped of their Datuk title by Sultan Sharafuddin Idris Shah of Selangor. The Sultan made the ruling because he was not happy with recent developments in which individuals conferred Datuk titles have been implicated in criminal activities.

During his stint at Perwaja, the company accumulated losses of RM10 billion, forcing a company from China to bail out the Malaysian steel company.

During the administration of Tun Dr Mahathir, Maju Holdings was awarded the MEX Highway concession, and it came with an almost RM1 billion grant from the government to construct the highway.

In 2012, there were negotiations to sell Maju Expressway but nothing was finalised.
This plan was severely criticised by Tun Dr Mahathir, who compared the selling of MEX Highway to selling of APs. The former prime minister said, “You sell what is yours; you don’t sell what belongs to others. It could be as bad as selling APs.”

There were also allegations that he had cheated Tabung Haji, whose then chairman was Tun Dr Mahathir’s brother-in-law, the late Tan Sri Ahmad Razali Mohamed Ali, in the sales of office space at Maju Junction.

While we may agree that Tan Sri Abu Sahid has done well with the 26km long MEX Highway and TBS in Bandar Tasik Selatan, his mysterious departure from Perwaja, and the controversy surrounding the Maju Junction office space will somehow taint his credibility.

In February 2016, Tan Sri William Cheng was reported by The Star to say, “I thought even if Parkson came in, if the mall was not well-managed in its entirety, it would be difficult for the department store to operate well.”

Who is Tan Sri William Cheng? Well, he is the Parkson Group chairman and managing director. He said this after Parkson became the anchor tenant and took over the management of Maju Junction. According to Cheng, Maju Junction Mall was not well-maintained before.

So, can Maju Holdings actually pull it off? When he said that he has the “the blessing from the highest levels in the country”, I wonder what he meant. Did he mean Tun Dr Mahathir Mohamad?

I feel the government, Khazanah and EPF should really think twice before selling off PLUS, a national asset, to an individual. There is a lot at stake here should Maju Holdings fail.-MYNEWSHUB.CC

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