LET me start with, in 2023, Gatwick Airport was ranked the second worst airport in the world, Edinburgh Airport is the fourth worst for flight delays in UK and Sydney Airport has significant issues with the slot system that interrupted air traffic services and a net loss of almost US$600 million (RM2.69 billion).
An independent adviser stated that the RM11 offer by the Consortium led by Khazanah Nasional Bhd, the Employees Provident Fund, and BlackRock- linked Global Infrastructure Partners (GIP) is “not fair but reasonable”. It represents up to about 20% discount to the estimated fair value based on a sum-of-the-parts valuation. It is “reasonable in the absence of a competing offer”. It advised shareholders to accept the offer.
However, Malaysia Airports Holdings Bhd (MAHB) independent directors said the takeover offer is “unfair, unreasonable” and advised shareholders to reject since the RM11 represents a substantial discount. They even appointed a foreign international bank to assist with the assessment of the fair value and arrived at between RM10.95 and RM13.15 per share.
The offer is not reasonable due to MAHB’s positive financial momentum, clear growth strategy and trajectory, future prospects, and initiatives for development. What is unclear is the valuation model and what weighted average cost of capital (WACC) was used by MAHB advisers.
Strangely, the consortium countered the independent directors’ stating that they fail to take into consideration MAHB’s past performance and the challenges it faces. It said the prospects “are optimistic and unlikely to materialise without significant additional capital investment and an infusion of technical know-how”.
I am puzzled and perplexed because 70% of the consortium are the current shareholders in MAHB.
How do they view the new operating agreements from the government that extends the concession until 2069 with capital recovery mechanisms that enable significant investments in capacity expansion at key airports?
Other MAHB achievements during the year:
1. KLIA achieving a perfect score of 5.00 in the Airports Council International (ACI) Global Airport Service Quality Rankings, surpassing 355 airports globally
2. KLIA is a key player in global aviation, ranking as the second-most connected airport globally and leading in low-cost carrier connectivity
3. strategic collaborations with Beijing Daxing International Airport and Selangor’s Menteri Besar Inc for operational improvements and development projects
4. major upgrades at Penang, Kota Kinabalu, and Kota Bharu airports, funded by MAHB without government guarantees, showcasing financial independence
5. passenger traffic reached 101.2 million as of September 2024, with a more than doubling the net profit from 2023.
Strange too, because for a takeover, the due diligence should look at future prospects and growth opportunities based on market share, competitive positioning, consistent revenue streams, steady business – and not past performance and challenges.
Currently, MAHB is on a forward trajectory demonstrating clear goals orientation, focus and determination to find solutions culminating in growth and progress.
I trust the current shareholders, and for that matter, their ultimate shareholders won’t turn a blind eye to the positive developments in MAHB. It seems like MAHB has not been doing what it’s supposed to be doing.
A few observations on the whole process:
Was there proper due diligence, transparency, proper governance and emotional significance on the takeover?
To what extent was MAHB involved? If they were disengaged, employee’s morale and productivity will be affected causing confusion, mistrust, and resistance and could slow down the entire integration or even result in a failure.
The rejection by the independent directors speaks volumes.
Discussions on the privatisation began a year ago and there were insufficient communications and transparency. Once delisted post-takeover, transparency and accountability will be out of the public eye.
Being ‘reasonable in the absence of a competing offer’ means it is a done deal.
Latest news report says if the offer fails, MAHB’s share price will likely fall back to its RM8 level and Khazanah, it will have to go back to the drawing board on how to extract value.
This is a dangerous precedent as it supports the case that share prices can be artificially inflated to suit certain parties/initiatives. The Securities Commission and Bursa Malaysia should take serious note on this.
The Institute of Corporate Directors Malaysia should take a leaf from this episode where independent directors should not go with the tide.
Lastly, why are we rushing to privatise when MAHB is doing an excellent job in the past one year while GIP is struggling with the three airports they are managing?
What say you? – December 24, 2024
Saleh Mohammed reads Scoop
