MSWG Gains Vital First Victory In Its Battle Against MMC's Senai Airport Terminal Purchase

Last December I pointed out that MMC was rightly sold down due to its incredible unjustifiable RPT transaction for Senai airpot. MMC And Its Senai Airport Terminal Purchase!

It made zero sense in my flawed opinion.

More On MMC And Its Senai Airport Terminal Purchase

Some of the points highlighted in the local papers which I agreed so much.

• Based on the announcement, MMC has undertaken to advance RM417.2 million which is owed by SATS to the vendors. The vendors in the deal are Semarak Sestu Sdn Bhd and Suria Kemboja Sdn Bhd which own SATS. Both companies are believed to be linked to MMC’s major shareholder Tan Sri Syed Mokhtar Albukhary....
• In the first place, does MMC need more land? Even if it does, why must the deal be done now, especially in cash? Is it necessary for MMC to undertake the deal at this juncture when asset prices are fast coming down?
• When will Senai Airport and the land around it contribute to the bottom line of MMC positively? Also, what is the true valuation of Senai Airport and land that comes together with it?
• The unaudited net tangible asset (NTA) of the SATS Group and loss after tax as of June 30, 2008 are RM295.5 million and RM24.8 million.
• The proposed purchase of the 2,718 acres for RM9.45 per square foot (sq ft) is also questionable.Based on previous reports, the land was acquired from Lee Rubber at less than RM3 per sq ft. Now it is sold for three times the amount transacted less than two years ago.
• Why does it need more long term assets?
• Without strong cash flow, MMC will be sitting with a lot of assets but no cash to develop them.

Yesterday on Star Business.

• Wednesday March 4, 2009
  MMC investors want second opinion on SATS deal
  By DANNY YAP
  
  KUALA LUMPUR: Minority institutional and retail investors of MMC Corp Bhd want a second independent valuation on the proposed acquisition by MMC of the entire stake in Senai Airport Terminal Services Sdn Bhd (SATS).
  
  They reached the decision after two separate meetings held yesterday with the Minority Shareholders Watchdog Group (MSWG).
  
  A number of the minority shareholders, both institutional and retail, present at the meetings had expressed their concerns to MSWG over the valuation process.
  
  The first valuation on SATS, valued by IPC Island Property Consultants Sdn Bhd, was tagged at RM2.229bil.
  
  However on Aug 4, 2008, MMC announced to the stock exchange that the SATS valuation would be RM1.95bil to be satisfied by the issuance of 696.4 million new MMC shares at RM2.80 per share.
  
  But on Dec 5, 2008, MMC told Bursa the company was prepared to acquire SATS for RM1.7bil and that payment would be made by cash in full, via internally generated funds and disposal of some assets as well as external borrowings.
  
  This prompted the stock exchange to query MMC on Dec 10 on the reason for the revised mode in acquiring SATs (from shares to cash) and also the fall in price.
  
  Minority shareholders at yesterday’s meetings said since the acquisition involved a hefty sum of money, they felt a second independent valuation of SATS was warranted to ensure an objective and fair market price.
  
  Moreover, SATS was still a loss-making entity, they said.
  
  The minority stakeholders also wanted to know in greater detail how the acquisition of SATs would benefit and enhance their interest, especially in terms of future dividends and the impact on MMC’s performance, going forward.
  
  “We are not against MMC’s acquisition of SATS so long as the purchase price is fair and is potentially yield-accretive but we need to be given sufficient knowlegde by the company to make an informed decision,” one shareholder said.
  MSWG chief excutive officer Rita Benoy Bushon said the meetings were held to enable institutional and retail investors to voice their concerns so that MSWG could relate their views to MMC’s management on Wednesday.
  
  “We will be seeing them (MMC management) tomorrow,” she said, adding that MSWG would be having more of such meetings in future with minority shareholders to benefit all stakeholders.
  
  Bushon said the meetings were also to educate minority shareholders on their rights as shareholders so that they could make an informed vote.
  
  MMC’s AGM could be in this month and an EGM for minority shareholders to vote on the SATS acquisition was expected before the AGM.
  
  It is believed that the proposed SATS acquisition would further increase MMC’s intangible assets and goodwill upon consolidation.
  
  Bushon said that since the SATS acquisition by MMC involved a related-party transaction, the minority shareholders’ votes were critical in the decision-making process.
  
  She said this was MSWG’s first meeting on such issues and that while the turnout was encouraging, it could have been better.
  
  “MSWG would like to see greater participation from retail and institutional investors in future meetings since they are financial custodians to many smaller investors.”

Great job Rita!

Great job MSWG!

And yes, I agree with what Rita is saying about participation.

In this MMC deal, the RPT nature of the Senai purchase made utter no sense in my flawed opinion. And if the minority shareholders wishes NOT to get the short end of the stick, they should participate in such events. It's their money, their rights and it makes only logical sense that the minority shareholders fight for what is just!

And on today's Business Times, there were some 'form' of positive development!

• MMC agrees in principle
  
  By Adeline Paul RajPublished: 2009/03/05
  
  MMC Corp Bhd (2194) has agreed in principle to get a second opinion on the value of its proposed acquisition of Senai Airport Terminal Services Sdn Bhd (SATS), says Minority Shareholder Watchdog Group (MSWG).
  
  "MMC has agreed in principle, subject to their board's approval, to obtain a second valuation by a reputable independent valuer to give comfort to the minority shareholders," MSWG chief executive officer Rita Benoy Bushon said after meeting with MMC's management yesterday.
  
  She said the board's approval was needed as it would be a costly exercise for MMC to appoint another valuer.
  
  If approved, the new valuation would take into consideration the current market situation.
  
  MMC's plan to buy the loss-making SATS for RM1.7 billion is controversial as it is a related-party transaction.
  
  Institutional and minority shareholders are worried as to whether MMC, a conglomerate owned by Tan Sri Syed Mokhtar Al-Bukhary, is paying a fair price for SATS, which is also owned by Syed Mokhtar.
  
  The first valuation, by IPC Island Property Consultants Sdn Bhd, tagged SATS at RM2.23 billion, but minorities argued that the sum did not reflect the current market situation and have been insisting on another independent valuation.
  
  MMC, meanwhile, said yesterday that it would address all concerns over the SATS deal in a circular to shareholders sometime this month.
  
  It is targeting to hold an extraordinary general meeting, at which shareholders can vote on the deal, by the end of the month.
  
  "All their concerns will be addressed in the circular, which has been submitted to Bursa Malaysia for approval," senior general manager of corporate services Azlan Shahrim told Business Times yesterday.
  
  The circular will provide sufficient information for shareholders to make an informed decision and determine whether the deal is earnings-accretive to MMC, Azlan said.
  
  MMC's management had an hour-long meeting with MSWG yesterday afternoon to discuss the SATS deal.
  
  MMC took note of MSWG's views, including concern, over the valuation process, Azlan added.
  
  According to Bushon, MMC had said that borrowings for the deal would be minimal and that the credit line was available.
  
  Minorities had been concerned that MMC's cash funds of RM3.8 billion would be reduced after the proposed acquisition. It already has large long-term borrowings of almost RM20 billion.

My fingers are crossed for a positive ending in this annoying RPT transaction in MMC.