KUALA LUMPUR, Aug 24 ― Sime Darby Bhd is acquiring a 61.2 per cent stake in UMW Holdings Bhd from Permodalan Nasional Bhd (PNB) for RM3.57 billion in cash, to further scale up and strengthen its presence in the Malaysian automotive sector.
The exercise, one of the largest merger and acquisition deals in Malaysia, will strategically transform Sime Darby into a leading automotive player in the country with the addition of high-volume mass-market brands, Toyota and Perodua, capturing up to 60 per cent of domestic automotive total industry volume.
Group chief executive officer Datuk Jeffri Salim Davidson said the acquisition will complement Sime Darby’s existing premium-to-luxury portfolio, namely BMW, Rolls-Royce and Porsche.
Above all, it will allow the group to scale up its operations in Malaysia, balancing any geopolitical risks in the region from its two key markets, namely China and Australia.
Post-transaction, he expects revenue contribution by region will be approximately 30:30:30 immediately, from the current 15:37:35 (Malaysia, China, Australia, respectively), therefore offering a more stable profile.
“UMW is already a dominant automotive player with a 52 per cent share of the local market, and the exercise is expected to bring the share up to 55 per cent.
“The enlarged entity will create greater value for all our stakeholders and allow us, as a Malaysian multinational company, to play a better role in growing the national automotive industry,” he told Bernama.
Jeffri said following the conditional share purchase agreement (SPA) with PNB today, the group will seek shareholders' consent at an extraordinary general meeting in November.
He said the RM3.57 billion transaction (based on a RM5 per share under the SPA), is earnings accretive and will benefit Sime Darby shareholders as well as PNB unit holders in the long run.
Greater opportunities and capabilities
Jeffri said the acquisition will enable Sime Darby to access Toyota’s ecosystem and add another coveted marque to its stable of brands, thus creating fresh opportunities for the group to grow in new geographies.
The move will also strengthen the group’s high-margin segments such as used cars, aftersales and assembly, due to the large volumes that it will command.
“Besides broadening our earnings base, our presence in other parts of the value chain creates resilience against changing retail models,” he said.
Additionally, he said the acquisition will bring Toyota Forklifts -- under Toyota Industries Corporation -- into Sime Darby’s portfolio, giving it exposure to a high-growth material handling business that is fuelled by the e-commerce boom.
“Materials handling will add another dimension to our industrial division, to complement our mining and construction exposure,” he said.
As for Perodua, Jeffri said the automaker holds a dominant market share in the local automotive industry and is the largest value component in the transaction.
UMW delisting on the table
Jeffri said the acquisition will be funded primarily by bank borrowings and internal funds.
“We will look into bringing down our gearing with strategic disposal of non-core assets,” he said.
Once the agreement becomes unconditional, he said Sime Darby will be making a general offer to acquire the remaining 38.8 per cent stake in UMW, with the aim of delisting UMW from Bursa Malaysia.
He noted that the group expects to complete the takeover by end-February 2024.
Jefri said the group will undertake a thorough review of UMW’s portfolio of brands to assess the compatibility against its existing portfolio and ensure that Sime Darby maintains a strong spectrum of products and services to continuously enhance value for shareholders.
“We care deeply about our commitment to all principals. We will manage each brand separately and continue to build on the excellent work with our enterprising spirit and forward-thinking mindset.
“One of the first steps in our post-acquisition integration plan focuses on a seamless transition and integration while leveraging the strengths of both companies and all the brands within,” he said.
Workforce and Bumiputera concerns
Jeffri said the post-acquisition integration will have minimal operational disruptions as the group is committed to maintaining the integrity of both companies ― Sime Darby and UMW ― and capitalising on synergies.
For now, the priority is to ensure that all conditions are met and the group is able to complete the acquisition with the support of all its principals, shareholders and employees, he said.
“PNB remains a significant shareholder of Sime Darby, hence, in terms of equity participation, the Bumiputera interest remains intact.
“Additionally, the vendor and supplier ecosystem for Toyota and Perodua will remain and there are Bumiputera equity requirements to ensure Bumiputera participation along the value chain,” he said.
Jefri said Sime Darby is a proudly Malaysian brand with 110 years of history in the country.
As a homegrown entity, it has always supported the growth and development of local talent, having many Malaysians in various leadership positions across its organisation. ― Bernama