Bloomberg News

Billionaire Syed Mokhtar Gets Mahathir Support to Buy Proton

December 13, 2011

(Updates share prices in fifth paragraph.)

Dec. 13 (Bloomberg) -- Syed Mokhtar Al-Bukhary, Malaysia’s second-youngest billionaire, received former Prime Minister Mahathir Mohamad’s endorsement to acquire a controlling stake in automaker Proton Holdings Bhd.

DRB-Hicom Bhd., Syed Mokhtar’s auto assembler, is the best candidate to buy the government’s 43 percent stake in Proton, Mahathir, now an adviser at the carmaker he founded in 1983, said in a joint interview yesterday in Putrajaya, outside Kuala Lumpur. Officials at DRB and Khazanah Nasional Bhd., the government investment arm holding the Proton shares, weren’t immediately available to comment.

The support of the man who was Malaysia’s prime minister for two decades indicates DRB’s purchase of the stake -- valued at 993 million ringgit ($314 million) at current prices -- is imminent because of the former premier’s lingering influence, according to James Ratnam, an analyst at TA Securities Holdings Bhd. Proton would add the owner of the Lotus sports car brand to Syed Mokhtar’s business empire, which includes ports, airports and power plants.

“Mahathir’s view and approval would be sought by Khazanah if it wants to sell Proton,” said Ratnam, an analyst in Kuala Lumpur. “He is the adviser and founder of Proton, the company is still very close to his heart even as he has retired.”

Proton advanced 1 percent to close at 4.27 ringgit in Kuala Lumpur today, extending its lead as the best performer on the FTSE Bursa Malaysia 100 Index in the past month to 58 percent. DRB-Hicom was unchanged at 2.12 ringgit.

General Offer

Should DRB seek to buy a 43 percent stake, it would be obliged to make a general offer for Proton’s remaining shares under Malaysian acquisition rules.

Syed Mokhtar, 60, is the Southeast Asian nation’s second- youngest billionaire after Berjaya Corp. Chairman Vincent Tan, according to Forbes magazine’s latest rankings. His ties to Mahathir, who describes the Malaysian tycoon as a friend, stretch back more than a decade. About a year before Mahathir stepped down in 2003 as prime minister, he awarded a $3.8 billion rail project -- then the nation’s biggest infrastructure undertaking -- to contractors including Syed Mokhtar’s MMC Corp.

DRB would be able to consolidate and expand its share of Malaysia automotive market with a Proton acquisition, TA Securities’ Ratnam said. DRB manufactures, distributes and assembles a range of vehicles from motorcycles to garbage trucks for brands including Suzuki, Mercedes-Benz and Yamaha. It has eight assembly plants of which four are for cars, including one in Malaysia’s southern Malacca state where Hondas are made.

Volkswagen Partnership

Selangor-based DRB began manufacturing its first Volkswagen AG Passat vehicles several weeks ago after signing a partnership agreement with the German carmaker last year.

Proton, whose vehicles are driven by taxi drivers across Malaysia, are among the cheapest cars sold in the country. The company, which had two annual net losses over the past five years, is poised to see its profit fall 51 percent in the year ending March, according to the average of 13 analyst estimates compiled by Bloomberg.

Proton has been looking for a strategic partner to compete with global automakers such as Toyota Motor Corp. Partnership talks to form a partnership with Volkswagen, Europe’s largest carmaker, ended last year.

While Khazanah approached local companies Naza Group and Sime Darby Bhd. about buying the Proton stake, Syed Mokhtar’s DRB may be the best fit, said Mahathir.

“DRB seems well-run,” Mahathir said. “It is already producing cars for Suzuki, Mercedes and Volkswagen. They have the capacity to turn around Proton and won’t undermine its vendors.”

--With assistance from Elffie Chew and Manirajan Ramasamy in Kuala Lumpur. Editors: Young-Sam Cho, Suresh Seshadri, Barry Porter.

To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho in Tokyo at ycho2@bloomberg.net


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