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.