13 October 2010

Why MMC want to take over UEM Group?

When the RM15.6 billions take-over news broke out, MMC share price has been rallying to multi-months high. It was reported that MMC is pairing with EPF and PNB with MMC holding a 40% stake of the consortium. On the other hand, Khazanah Nasional Bhd is the ultimate holding company of UEM Group Bhd.
The Pull factors…
  1. PLUS Expressways, is one of the key assets that spark MMC interests? The national’s largest cash-generating toll-operator undeniably is Khazanah’s golden asset with 55.2% direct and indirect interest.
  2. UEM Land, which has a huge land bank in southern corridor – Iskandar Development Region. This is favorable to Johor based MMC’s investments.
  3. To boost its construction arm with stronger muscle? UEM Group is having several projects in Malaysia, such as the Penang Second Bridge. MMC can leverage on the latter expertise and also to gain market share, given the lack of domestic awards.

What makes me interesting is the alternative MRT proposed by IJM-UEM recently. By acquiring UEM, MMC could break-up the joint venture and effectively eliminate the said rival proposal which reportedly costing much lower than the Gamuda-MMC RM35bil proposal. There are two possibilities:
  1. Take-over succeeds.
  2. Failed. But, MMC guaranteed succeeds in MRT project, because government is running out of time to consider an alternative proposed by IJM-UEM joint venture, which is remain uncertain.
Either way, MMC will gain more than harm. Or, is this the strategy employed by MMC?

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