Malaysia state agency wins control of United Engineers
Malaysia state agency wins control of United Engineers
KUALA LUMPUR (Reuters): Malaysian state agency Syarikat Danasaham said on Friday it had won control of infrastructure firm United Engineers (UEM), the first step of a US$1.0 billion plan to salvage the country's biggest debtor.
UEM, part of the UEM-Renong group, owes more than 20 billion ringgit ($5 billion), most of which it cannot repay after spending huge sums in state projects that have been slow to generate sufficient returns.
The government takeover of UEM has been a major factor behind recent renewed investor interest in local stocks, which had posted strong gains since early July until Tuesday's terror attacks in the United States caused markets to falter globally.
Investors hope the government can finally resolve the group's huge non-performing debts, which are weighing on the banking system, and breathe new life into Malaysia's stifled markets.
With UEM in its pocket, complex cross-holding structures mean the state has also won indirect control over Renong, a diversified industrial group.
The group owns vast strategic infrastructure assets including highways stretching the length of the peninsula, telecommunication networks and mass rail transportation systems.
Danasaham launched its 3.8 billion ringgit takeover bid to wrest control from tycoon Halim Saad, a protege of former finance minister Daim Zainuddin, in July.
Danasaham offered to buy UEM at 4.5 ringgit a share on the condition that it received acceptances of at least 90 percent.
"The minimum 90 percent mark has been crossed and Danasaham has control," a spokesman for Aseambankers, the merchant bank advising the agency, told Reuters.
"Because shares are still being transferred, the actual numbers will only be made known on Monday at 9 a.m. (8 a.m. Jakarta time)," the spokesman added.
Trading in UEM shares was suspended at the start of the afternoon session and the spokesman said it would be requoted early next week. The stock had ended the morning session up four cents at 4.24 ringgit, off an earlier high of 4.48.
Investors were pleased with the state's win, but it was not enough to arrest a two day slide that began after the terror attacks against the United States on Tuesday.
The benchmark Composite Index pared some of its morning losses, but could not sustain the gains and ended down 3.01 percent at 644.53, just above a morning low of 641.18.
Renong shares ended Friday down 3.5 cents at 75.5 cents, having hit a high of 80 cents after the news.
Analysts were unsure how far the market could rally given the gloom pervading global markets after the U.S. attacks, wary of the increased likelihood of a prolonged global slowdown and the consequences of any retaliatory action from the United States.
"This is the initial reaction and, though it can take the edge off the current pessimism, market direction may need a bigger booster," said Mak Hoy Kit of KAF, Seagroatt & Campbell.