KUALA LUMPUR: It has been an eventful year for corporate development in 2017 with major movers and shakers in the motor vehicle, energy, plantation, aviation and banking industries jolting the local scene.
During the year, companies consolidated their positions and embarked on deals to strengthen their financials and gain further market shares as well as competitiveness.
Malaysia witnessed merger & acquisition (M&A) deals valued at US$17.6 billion (US$1 = RM4.07) in 2017, the highest in the past five years, according to Duff & Phelps Transaction Trail 2017.
The report by the global valuation and corporate finance advisor looked at M&As, private equity and venture capital deals and initial public offerings in Singapore, Malaysia and Indonesia.
The energy sector continued to witness high deal value activities for inbound M&As and real estate being the top sector for domestic M&As.
The two largest M&A transactions in 2017 were the acquisitions of 50 per cent stakes in Refinery and Petrochemical Integrated Development and PRPC Polymers Sdn Bhd, both by Saudi Arabian Oil Co.
In the property sector, SP Setia Bhd’s buy of I&P Group Sdn Bhd for RM3.65 billion to boost its landbank paved the way for the merger of the property groups and set the pace in M&A deals this year.
The motor vehicle industry has generated a lot of euphoria with the landmark deal of the year after China-based Zhejiang Geely Holding Group Co Ltd (Geely) acquired a 49.9 per cent stake in national carmaker, Proton Holdings Bhd.
The objective was for Proton to regain its glory in pole position in Malaysia’s motor vehicle market as well as making inroads into overseas markets through the injection of new management and expertise from Geely.
It was believed that Geely, which also owns Swedish Volvo car company, could turn Proton around.
However, this could not happen overnight as Proton would likely remain loss-making until it can introduce new models to boost sales volume.
It is expected that the launch of the right-hand drive Boyue-based sports utility vehicle next year, would consolidate Proton’s position and provide the impetus to grow.
Meanwhile, for national carrier Malaysia Airlines, it is focusing on its turnaround plan to turn the airline to the path of profitability after the sudden departure of its Chief Executive officer (CEO), Peter Bellew.
The airline will be improving on its passenger yield and consolidate its position after recording a better yield of 22.6 sen per passenger in the third quarter of 2017 from 21.4 sen in the second quarter.
The airline is looking forward to a fresh new beginning and to spread its wings wider after a turbulent year, amid stiff competition and rising fuel, with the new Group CEO, Captain Izham Ismail, pointing out to the need to step up and address rising costs from fuel and foreign exchange volatility.
Izham, who assumed the role of Group CEO on Dec 1, 2017 upon the departure of Bellew, has been integral to the airline’s ongoing turnaround effort.
As Chief Operating Officer, he was responsible for the operations division and had also led the restructuring of the engineering division and was also responsible for the airline’s fuel savings initiative.
Malaysia Airlines has continued investing in aircraft, products, service and technology as part of its transformation programme.
The delivery of the first new Airbus 350-900 aircraft from Air Lease Corp on Nov 30, 2017 would boost its flagship service to London starting Jan 15 next year.
In the plantation sector, Felda Global Ventures Holdings Bhd made headlines on concern that its transformation to become an agri-powerhouse by focusing on efficiency and profitability could be stalled.
This was amid its high-profile corporate crisis involving its high-ranking officers and the probe on irregularities and alleged wrongdoing that raised issues on certain business transactions.
Changes were made to its management and in welcoming Datuk Wira Azhar Abdul Hamid as the new chairman.
Analysts also hailed the comeback of its Group President and CEO, Datuk Zakaria Arshad, effective Oct 16, after his leave of absence in June amid domestic inquiry proceedings and investigations into dealings in the group.
In the banking sector, AMMB Holdings Bhd and RHB Bank Bhd suspended merger plans on failure to agree on terms and conditions for a proposed merger exercise.
However, Malaysia Building Society Bhd’s (MBSB) merger with Asian Finance Bhd (AFB) is set to transform the banking landscape, paving the way for MBSB to be the second biggest Islamic banking group.
MBSB got approval from the relevant authorities to acquire AFB for RM644.95 million.
Srividya C. Gopalakrishnan, Managing Director of Duff & Phelps Singapore Pte Ltd, said consolidation among Malaysian companies as well as possible transactions involving privatisation of some listed companies are expected to define Malaysian corporate landscape next year.
“We expect a significant part of the transaction values next year for Malaysia to come from M&A,” she said.
Srividya said the drivers for M&A would include revival in energy and oil & gas transactions, continued interest from global corporates in asset-heavy industries in Malaysia as well as increased impetus from Malaysian conglomerates to grow overseas businesses.
Based on sectors, she said, telecommunications and energy were likely to be the strong sectors driving transactions next year.
During the year, Axiata Group Bhd’s unit, edotco Group Sdn Bhd, embarked on its biggest deal involving the acquisition of 13,000 telecommunications towers in Pakistan for US$940 million to boost its position as a leading independent tower company.
The acquisition is expected to put edotco as the world’s eighth biggest independent tower company.
“We also expect to see other sectors such as real estate and consumer staples see healthy levels of activity in 2018,” she said. – Bernama