Analyst: RM0.27 or nothing for MAS’ minority shareholders

Analyst: RM0.27 or nothing for MAS’ minority shareholders

KUALA LUMPUR: The minority shareholders of ailing Malaysia Airlines System Bhd (MAS) may end up with nothing if they reject the 27 sen per share offer at the extraordinary general meeting (EGM) scheduled for November 6, a prominent economist said today.

Dr Yeah Kim Leng, Dean of the School of Business at the Malaysia University of Science and Technology had this advice for the minority shareholders – It is best to “bite the bullet” and at least recoup some of your investments.

Sovereign wealth fund Khazanah Nasional Bhd on August 30 unveiled a radical plan to revive MAS that called for job cuts, a capital injection of up to RM6 billion and the creation of a new company (Newco) to carry out the airline business.

In addition, it offered 27 sen a share to minority shareholders and upon approval MAS will be delisted from Bursa Malaysia as part of the restructuring plan aimed at returning the national carrier to profitability within three years of delisting.

Dr Yeah also said that had MAS been a private entity now, the existing minority shareholders would have lost all their investments.

“They would have gotten zero value out of their investment. Fortunately, Khazanah is stepping in. So the 27 sen being offered should not be seen as too low because at least with the capital injection and buyout by Khazanah, they would have recouped part of their investments,” he told Bernama.

He said given the fact that no other white knight had appeared on the horizon capable enough to rescue MAS, there were no strong grounds for the minority shareholders to reject the offer.

“Of course, they can bargain for higher value but given the quagmire MAS is in, it is difficult to argue for higher valuations for their shares,” he added.

In agreeing with Dr Yeah’s view, former Transport Minister Tan Sri Ong Tee Keat said the minority shareholders actually had no choice but to accept the offer.

“When the company is going to be delisted, what choice do we have? You have to accept it,” he said.

Ong said the government being answerable to the taxpayers was caught in a catch-22 situation, adding that: “You cannot afford to appease the minority shareholders at the expense of the taxpayers. I think this is kind of a delicate balance the government needs to strike”.

He said if MAS were to go under had Khazanah not come to its rescue, the minority shareholders would not get anything at all.

MAS in its circular dated October 15, 2014 had called on its minority shareholders to accept Khazanah’s 27 sen offer price for the privatisation of the ailing airline to pave the way for its recovery plan.

The MAS comprehensive recovery plan announced by the sovereign fund on August 29 is contingent upon acceptance of this RM1.38 billion privatisation.

The national airline, which suffered losses for the last three financial years, is facing immense pressure to improve its financial performance. And the twin tragedies of MH370 and MH17 have made revival more difficult.

Given the challenging environment in the aviation sector, MAS’ weak financial performance is likely to continue.

In its circular to shareholders, who are due to meet on Nov 6, MAS highlighted that it needed to undertake comprehensive restructuring urgently to address adverse business conditions, and that the national carrier needed funding to sustain its business.

MAS is said to be burning RM4 million a day to keep its operations running.

And should MAS continue to incur heavy losses coupled with the depletion of cash reserves, any absence of financial support may further worsen its financial condition and trigger PN17 of the Listing Requirements.


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