In a deal that is making headlines within the country and across the globe, Malaysian business tycoon T. Ananda Krishnan is bidding to take full control of Maxis Communications, the country's leading mobile phone company.
The deal, valued at $11.2bn, will offer a 20% premium over the current share price of $3.80, and is expected to be completed in a few weeks time.
Krishnan said the deal would make it easier for management to expand the company outside of Malaysia, where 70% of the country's population of 27m own mobile phones. Maxis already has stakes in telecoms companies in India (Aircel) and Indonesia (PT Natrindo Telepon Seluler), with both countries considered high growth markets that are a number of years away from reaching market saturation.
Taking the company private will give Maxis' greater flexibility. There will be a significant requirement for large initial capital outflows, which can put off shareholders due to the risks associated with cash flow and earning volatilities, as well as limiting the ability to pay out short-term dividends.
While the Maxis story is making headlines overseas due to the sheer financial size of the deal, within Malaysia, analysts are watching to see if a precedent towards blue chip companies de-listing from Malaysia's stock exchange is being set.
Maxis is Malaysia's 9th largest company, and upon its delisting, will lead to the exchange's market capitalisation being reduced by 4%. Maxis has, however, publicly stated that once it is content with the level of expansion achieved overseas, it plans to re-list on the exchange,
though this could take a few years.
In addition to the Maxis deal, a $6.5bn buyout for the minority shares of Malakoff, a power company with large overseas projects in Saudi Arabia, Algeria and Oman, was completed earlier this month, while Singapore-based and listed agribusiness company Wilmar International is currently in talks to buy out PPB Palm Oils, one of Malaysia's largest palm oil plantation companies.
Many analysts have said this de-listing trend is not all gloom, and may even have positive ramifications. There will be large, market-value inflated cash payoffs reaching the hands of minority investors, who analysts believe will re-invest the money in other blue chip Malaysian stocks. In addition, the billions of ringgit required to fund the de-listing will be raised privately in the bond market, essentially shifting the funds from the stock to the capital markets.
The move is also sparking a re-allocation of funds in the telecoms sector, with share prices in DiGi, Malayia's fastest-growing cell phone provider, and Telekom Malaysia, the country's national telecoms provider, last week reaching an all-time and 12 month high, respectively.
An additional point is the strong run of Malaysian consumer brands going abroad to achieve economies of scale that cannot be reached with a population of 27m. Malaysian companies like the no-frills airline Air Asia, pay television company Astro and resorts operator Genting have established strong brand names across South East Asia, and people, both locally and overseas, are paying attention.
As Piyush Gupta, CEO of Citigroup Malaysia told OBG, "More than ever, Malaysian companies are investing outside of the country, and we as an international bank are paying attention as we want to go with them. What we are seeing is a phenomenon that some have termed "Malaysia Inc." I see a great similarity with the business model of overseas investment patterns followed by Dutch companies such as Philips and Unilever and Scandinavian companies like Ericsson many years ago as they expanded into bigger markets across Europe. It will certainly be interesting times ahead."
In addition to Maxis, Krishnan has an interest in the publicly traded pay TV operator Astro as well as Tanjong, a power and gaming group. Krishnan is also widely regarded for being the individual behind the conception of the world famous Petronas Towers development. His net worth is estimated at $6bn, making him Asia's 17th wealthiest person, according to Forbes Magazine.