Nazir says SC proposal would severely hit M&As

Tuesday April 6, 2010

Nazir says SC proposal would severely hit M&As
By ELAINE ANG

elaine@thestar.com.my

PETALING JAYA: The Securities Commission’s (SC) proposed rule change on the assets and liabilities method of buying listed companies will result in a severe drop in merger and acquisition (M&A) activities in the country, said CIMB Group Holdings Bhd group chief executive Datuk Seri Nazir Razak.

“(The SC proposal) in its present form, absolutely, will cause a drop especially in mergers, not so much takeovers. Value is created by mergers,” he told a press conference to announce the group’s plans to set up a research institute to promote Asean integration yesterday.

The press conference was held on the sidelines of the 7th Asean Leadership Forum.

To recap, the SC had recently issued a consultative paper which proposed to raise the shareholder approval level in an acquisition via assets and liabilities from the current simple majority to 75% shareholder approval.

It also suggested an additional requirement that not more than 10% of shareholders present can object to the deal.

Under Section 132 (c) of the Companies Act, a buyer only needs a simple majority to take out the assets of the listed company.

This allows the buyer to circumvent the Takeover Code, where the threshold to take over a company and de-list it is higher at 90% acceptance of shares outstanding that are not owned by the offeror.

This is aimed at protecting the interests of minority shareholders by requiring a higher threshold of shareholder approval before a deal is done.

Nazir said if the bar was set too high there would be no deals.

“What we want is a framework to protect minorities but enables transactions to be done. In its present form, it is so prohibitive that you will see a very sharp drop in M&As.

“Is that good for the country and capital market?” he said.

Nazir highlighted the need to strike the right balance between the interests of the majority and minority shareholders.

“Minorities also profit a great deal from M&A activities. We have to be very sensible in evaluating the new proposals.

“I have heard comments that the higher the takeover threshold the better, especially for minorities. It is not true that the more power to minorities the better it is.

“Minorities also need deals, mergers and takeovers,” he said.

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