Khazanah to privatize trouble-hit Malaysia Airlines
Malaysia Airlines (MAS), the beleaguered national carrier that has tragically lost two planes in the space of four months, will be privatized and restructured by its largest shareholder, Khazanah Nasional in a deal worth MYR1.38 billion ($432 million).
Khazanah owns 69% stake of MAS and will pay MYR0.27 per share for the rest of the company, according to an MAS filing. This represents a 12.5% premium to the August 7 closing price and a 29.2% premium to the three-month volume weighted average market price. Once it has taken full ownership, Khazanah will de-list MAS.
The company has posted cumulative losses of MYR4.13 billion over the last three years and CEO Ahmad Jauhari Yahya said in the 2013 annual report that the future continues to look challenging due to rising competition, high fuel costs and a weak foreign exchange position.
The situation has been exacerbated by the disappearance of flight MH370 in March and last month's shooting down of MH17. The loss of 537 lives on the two aircraft has pushed MAS to the verge of collapse.
MAS has a fleet of 88 aircraft and operates more than 250 departures each day. It carried 20.7 million passengers in 2013, up from 16.6 million in 2012, but its losses widened from MYR430.7 million to MYR1.17 billion. Revenue increased from MYR13.76 billion to MYR15.12 billion over the same period.
Dato' Sri Mohd Najib bin Tun Hj Abdul Razak, prime minister of Malaysia and the chairman of the Khazanah board, said that de-listing MAS is essential to returning the company to profit, Bloomberg reported. A comprehensive restructuring plan will be unveiled before the end of the month.
"We believe our national carrier must be renewed," he said. "This means wholesale change ... only through a complete overhaul of the company can we deliver a genuinely strong and sustainable carrier."
Khazanah is a strategic investment fund entrusted to hold and manage commercial assets of the government and to undertake strategic investments. It has stakes in more than 50 companies with assets valued in excess of $25 billion. In addition to MAS, Khazanah owns Malaysia Airports Holdings and aircraft leasing business Penerbangan Malaysia.
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