Mitsubishi sells shares in Proton

Mitsubishi sells shares in Proton

Agence France-Presse, Kuala Lumpur

Japan's Mitsubishi has sold shares representing 7.93 percent of Malaysia's national car maker Proton to institutional funds, an industry source said on Monday.

The 43.56 million shares were placed by investment bank CIMB and snapped up mainly by local institutions, the source said.

"The shares were owned by Japan's Mitsubishi group and the placedment was offered at a 5-10 percent discount to last Friday's closing price of 9.80 ringgit (US$2.57)," the source told financial newswire AFX-Asia.

Mitsubishi Motors and Mitsubishi Corp. had offered to sell their collective 15.8 percent stake in Proton to its key shareholder, Khazanah Nasional, but Khazanah turned it down while pledging to keep control of the carmaker.

Proton was established in 1983 by Malaysian companies as well as Mitsubishi Motors and some Mitsubishi group companies.

Mitsubishi's pullout could deal a blow to Proton, which is grappling with poor sales due to intense foreign competition ahead of market liberalization under the Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA).

Analysts said Mitsubishi's withdrawal, however, appears to be a commercial decision to reorganize operations in Asia due to financial troubles and did not reflect Proton's fundamentals.

Proton's market share tumbled to 49 percent last year from 60 percent in 2002, with its car sales falling 27.5 percent to 155,420 units last year.

Under AFTA, import tariffs for most products in the region were cut to below five percent from last year. Malaysia obtained a two-year reprieve for its auto industry until 2005 but it recently said it would further defer reducing duties to the required level until 2008.