KUALA LUMPUR – The government’s decision not to sell PLUS Malaysia Bhd to Maju Holdings Sdn Bhd is the right move to avoid unnecessary financial problems in the future and prevent a bail-out.
As pointed out in a written reply to the Dewan Rakyat late last month, the decision to keep PLUS was due to the uncertainties and risks associated with the takeover bid.
Moreover, with the stroke of what is surely a definitive decision by the Finance Ministry, it ensured the continuity of dividends flowing down to 14.5 million contributors to the Employees Provident Fund (EPF).
This means there would be no disruption to the benefits they are reaping and to ensure contributors continue reaping dividends from EPF’s 49% equity in PLUS.
Besides EPF, the UEM Group owns a 51% equity in PLUS.
Doubts over the takeover’s financial capability were raised after Maju Holdings Executive Chairman Tan Sri Abu Sahid Mohamed made a whopping RM36 billion offer for the company to buy all PLUS highways.
The government, in arriving at its decision, must obviously have weighed the financials of such a massive deal and studied it closely.
And, financial analysts and bankers must have been in one mind when they looked at the numbers because the mathematics didn’t add up.
For instance, the proposal uses the assumption of two per cent as being the coupon rates for the bonds.
However, only Khazanah Nasional Bhd and UEM can use a two per cent rate because nobody except UEM and Khazanah would get a triple A rating like they have now.
Any individual person or private company would definitely get a lower rating of AAB or ABB, which means double the interest payment for the bonds.
The bonds would have to be re-rated and they would have to pay more.
So, a back of the envelop calculation also shows that Maju’s proposal to freeze toll rates is untenable.
Therefore, the government was right in arriving at the decision in safeguarding the interest of the public and EPF contributors.
The Finance Ministry was right in demanding that any PLUS takeover must be supported by clear and strong financial sources so that it could continue operating despite economic shocks or volatility in foreign exchange.
“This is important, so the government would not have to bail out PLUS if any untoward incident happens,” the ministry had said in a written reply to Hee Loy Sian (PKR-Petaling Jaya Selatan), who enquired about the decision following Maju Holdings’ RM36 billion offer to acquire all PLUS highways.
“Due to risks and uncertainty in this matter, the government has no plans to let go of PLUS’ stake to Maju Holdings,” it said.
Understandably, the government does not want to bail out someone down the road, which clearly has shut the door o any intended acquisition of PLUS.