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2012-01-06 - 11:11:00 - DJ UPDATE: Proton Holdings: Chairman Bids For Khazanah's Stake In Company

DJ UPDATE: Proton Holdings: Chairman Bids For Khazanah's Stake In Company

-- Proton Holdings chairman bids for state investment firm Khazanah Nasional's stake in company

-- Analysts say DRB-Hicom better placed to win the stake

(Adds background in 2nd, 4th and 6th paragraphs, analysts' comments in 7th-9th and the last paragraph.)

By Ankur Relia


KUALA LUMPUR (Dow Jones)--Malaysia's Proton Holdings Bhd. (5304.KU) said Friday its chairman, Mohd Nadzmi Mohd Salleh, is bidding for the 42.7% stake in the company held by state investment firm Khazanah Nasional Bhd., as the executive looks to turn around the car maker.

The stake would be valued at MYR1.17 billion ($371.4 million) based on Friday's closing price of MYR4.99. But as local regulations require an investor that purchases a stake of more than 30% in a firm to make a general offer for all of its shares, the total acquisition cost would likely be upwards of MYR3 billion, analysts say.

Mohd Nadzmi intends to retain most of the firm's existing management if he acquires the stake, the company said in a filing with Bursa Malaysia. No other details were provided in the filing.

The filing follows a report in local daily New Straits Times last month that DRB-Hicom Bhd., an automobile, financial services and construction firm that has a partnership with Volkswagen AG (VOW.XE), had put in a bid for the stake. DRB-Hicom Bhd. couldn't immediately be reached for comment Friday.

Mohd Nadzmi's bid for Proton comes as the car maker's profits have come under pressure in the past few quarters. Proton's second-quarter net profit declined 76% from a year earlier to MYR15.6 million, hurt by higher expenses at ailing British sports car unit Lotus. The outlook for the Malaysian auto maker this year is also challenging as the local car market has become saturated.

Khazanah is seeking a partner that can turn around the company. The stake sale is also part of a plan announced by Prime Minister Najib Razak to pare the state investment firm's holdings in local firms.

Analysts questioned the logic of Mohd Nadzmi's bid.

"I am a bit perplexed as to why he needs to buy a stake in the company in order to put in place the plans he has to turn it around," said RHB Research analyst Alexander Chia.

"The accepted wisdom is that for Proton to be a sustainable business, it needs to have backing of a global OEM (original equipment manufacturer)" and DRB-Hicom has to be the front runner due to its tie-up with Volkswagen, he said.

Separately, Proton said it is also in preliminary talks with General Motors Co. (GM) to sell it a stake in a factory in Malaysia. The Edge Financial, cited unnamed sources, reported earlier this week that GM may purchase a stake of 40% to 50% in Proton's Tanjuing Malim plant for between MYR700 million and MYR800 million.

"Talks with GM are only at a preliminary stage and as such warrant no announcement at this point in time," the Malysian firm said in a filing.

GM officials couldn't immediately be reached for comment.

Analysts said the deal is unlikely to happen before Khazanah's stake sale is complete.

   -By Ankur Relia, Dow Jones Newswires; 603-2026-1233;

(END) Dow Jones Newswires

January 06, 2012 06:11 ET (11:11 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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