Monday, August 15, 2011

MAS-AirAsia merger: Remake of hijacking of Avenue Capital 2006

There are so many talks about national carrier Malaysia Airlines merging with Air Asia on a share swap deal. A lot of people are very skeptical with this merger.

Tuesday August 9, 2011

Rivals MAS and AirAsia to become allies


PETALING JAYA: National carrier Malaysia Airlines and low-cost carrierAirAsia Bhd‘s major shareholders Khazanah Nasional Bhd and Tune Air Sdn Bhd will today announce a landmark share swap deal worth just over RM2bil which will turn the long-time bitter rivals into collaborating partners.
According to sources, under the share swap deal, Khazanah will acquire a 10% stake in AirAsia from Tune Air, a private vehicle controlled by Tan Sri Tony Fernandes and Datuk Kamarudin Meranun.
As at July 6, 2011, Tune Air owned a 26% stake in AirAsia. Sources also said Khazanah was in talks to acquire a 10% stake in long haul low cost carrier AirAsia X but this would be announced at a later date.
As part of the agreement, a source said MAS would issue new shares to Tune Air which would end up with a 20% stake in the national carrier. Khazanah, which has a controlling stake of 69% in MAS, will continue to remain the single largest shareholder in the national airline after the exercise.
The source added that MAS, which was in dire need for fresh capital, would also make a rights issue very soon.
The valuation of the swap will be based on the recent share price of both companies as the exercise involves non-controlling stakes. Trading in both counters are suspended until today for two days pending a material announcement. MAS and AirAsia were last traded at RM1.60 and RM3.95 respectively.
“There is really little that’s innovative about all of this. The reality is that if you look at the big players in the industry, they have a low cost arm and a premium arm. If anything, MAS is just playing catch up only now,” said an observer.
A special executive committee comprising three to five members including MAS newly-appointed chairman Tan Sri Md Nor Yusof anddirector Mohammed Rashdan Yusof as well as Tony and/or Kamarudin will be set up to run the daily operations of the carrier in the interim while the search for a new chief executive officer will commence soon.
The source said MAS CEO Tengku Datuk Azmil Zahruddin would step down from his post to make way for these changes while Rashdan, who is Khazanah’s executive director of investments, would likely play a more active role in the airline until a CEO is identified.
“The exco will be a subset of the board, which will take over the running and management of the airline in the interim. The main decision maker at the airline will be Md Nor,” said the source.
CIMB Investment Bank Bhd has been appointed advisor for the share swap deal representing both parties.
“If you stand back and look at this deal, you can see the value it will bring to a full-service carrier (FSC) like MAS. The trend among FSCs is that they are gradually deriving a bulk of their revenue less from the airline operations and more from ancillary services such as maintenance, repair, operations (MRO) services and so forth. These services are huge profit centres. Currently, AirAsia outsources these services. With this partnership, MAS can be the outsourcing agent,” said an analyst.
“This way, MAS which has a staff strength of 20,000 can use its people more productively. There won’t be a need to lay off staff as both airlines will be run separately,” said the source.
The deal’s defendants say this deal marks a “great opportunity to create Malaysia as an airline hub”. “The whole idea is not for Tony to run MAS. It is to realign both airlines’ interests to allow them to grow with a more clear business model MAS in premium segment and AirAsia in budget segment as opposed to being in each other’s way,” said an analyst.
A source said this deal “has been cooking for so long but in the absence of a structure that could work and concerns over a clash of cultures, it had failed to take off.”
Probably Malaysia Airlines would benefit AirAsia aggressive marketing program and approach from this merger. But then again, where is the real beef for Malaysia Airlines in this share swap deal?
Compare to Air Asia, Malaysia Airlines is an asset backed corporation. The paid up stands at RM 3.384 billion, where it is represented with a fixed asset value of RM 8.4 billion. The net asset is at RM 6.962 billion, where cash constitute RM 2.086 billion.
AirAsia is debt laden company with borrowings stand at RM 7.7 billion where else it cash position is only at RM 1.7 billion. Apparently even though voted as the best low cost carrier, AirAsia is said to be a bad paymaster. At one point of time, they owed Malaysia Airports over RM 65 million and whenever actions wanted to be taken against them, they run to their patron, then PM ‘Flip-Flop’ Dato’ Seri Abdullah Ahmad Badawi.
Of course Malaysia Airlines’ wealth is actually its network and position in the Tier-5 airline market. Having a series of awards marked to its service standards. Malaysia Airlines’ annual operating turnover is RM 12.98 billion versus AirAsia’s RM 3.948 billion. That is three times more sales for year 2010. Malaysia Airlines’ operating revenue from airline operation is at RM RM 11.649 billion against AirAsia’s RM 2.839 billion.
This merger is exactly like when ECM Libra ‘took over’ Avenue Capital Resources Bhd. in a very controversial takeover laced with manipulation and failure of disclosures, where the latter is valued four times more than the former. Avenue Capital’s intangible assets amounting to RM 296 million were irregularly impaired so that the merger value gap is being narrowed. The minority shareholders were denied of the rights to a Mandatory General Offer.
The ECM Libra – Avenue merger was full of irregularities and manipulation.
The culprit who are thought to be behind this is Rashdan “Danny” Yusoff and Datuk Omar Ong. Rashdan, who was then a partner in Binafikir Consulting which offered the ‘Wide Asset Unbundling’ (WAU) scheme to rescue Malaysia Airlines a few years ago is now a Director of Malaysia Airlines. Omar recently was appointed to the BOD of AirAsia.
It is expected that the outcome of this, would be share swap deal where Khazanah Nasional Bhd. relinquish 17% of its holding to Tune Air, the parent company of AirAsia and AirAsia X.  In return getting Khazanah would get 20% in AirAsia and 15% in AirAsia X. Of course it is rumoured that CIMB is the adviser to this deal.
The clear winner of this deal is Tony Fernandes. As a single largest shareholder in Tune Air, he would earn a seat in Malaysia Airlines Bhd. He would have a say in how, what, where and how much of Malaysia Airlines’ strategic business decision. With Omar on his BOD and being so close to Prime Minister Dato’ Seri Mohd. Najib Tun Razak, all strategic decision involving air travel and airline business would be unequivocally favourable to Fernandes’s side.
AirAsia could now expect to get a national carrier status.
It is AirAsia X’s dream to be a major intercontinental carrier. Getting landing rights would be a G-to-G arrangement and national carriers usually get the first right of refusal. Now AirAsiaX is accessible to  lucrative landing rights and destinations.
Malaysia Airlines did her fair share of national service and many Malaysians benefitted from this at the times where communications were poor or non existence. In 2005 when PM ‘Flip-Flop’ Dato’ Seri Abdullah Ahmad Badawi agreed to ‘Level Four Boys’  concocted ‘Airline Rationalisation Plan’, where Malaysia Airlines to run the ‘trunk route’ and feeder to the international destination where else AirAsia got the rest. This include heavily subsidized Rural Air Service. The most important element of the plan was Malaysia Airlines were prohibited to lower down its fair.
Fernandes took those routes to build up AirAsia’s capacity and also the numbers. The heavy subsidy was proven beneficial to his business model too. The moment the numbers went up substantially, Fernandes gave back the RAS away and Government insisted that Malaysia Airlines took the service back again, for the sake of Sabahans and Sarawakians.
Danny and Omar is about looking at numbers. Nothing else. And Khazanah MD Tan Sri Azman Mokhtar is all for that. Azman and Danny were the partners who told Malaysia Airlines to strip off her assets back in 2002 under the WAU scheme. If Malaysia Airlines needed marketing and work process boost, stripping the corporation and offering it to vultures like Fernandes is not the solution.
If this part of PM Najib’s Economic Transformation Plan, then probably majority of Malaysians may not be with him. The Malays still have not forgotten the how Shamsul Azhar brought in Wee and promoted Non Malays are Vice Presidents of Petronas, at the expense of the Malays who in past proven their abilities.
*Updated 345pm
Sources within said Malaysia Airlines MD Tengku Dato’ Azmil Zaharuddin was ‘shown the door’ minutes ago. He is going in Khazanah as Executive Director (Investment). Fernandes is said to have called all the executives for a meeting tomorrow.
*Updated 420pm
The new indpendent-non-executive BOD members for Malaysia Airlines are Tan Sri Wan Azmi Wan Hamzah, Tan Sri Tan Boon Seng, Dato’ Rohana Rohzan and David Low. DannyYusof  is now ‘designated’ Executive Director of Malaysia Airlines.
Fernandes and Dato’ Kamaruddin Meranun non independent and non exective directors with effect on 11 August 2011.
In interim, the corporation would be amanged by an executive committee chaired by Tan Sri Mohd. Nor Yusof. Members are Dato’ Mohamed Azman Yahya, Danny, Fernandes and Kamaruddin. They will oversee operations until new MD is appointed.
It is expected the new MD would be someone ‘Not unfamiliar to the company’.
*Updated 600pm
Announced by, Tune Air is to take 20.5% of Malaysia Airlines and Khazanah is buying in 10% into AirAsia. Khazanah now will have a net holding of 49.27%.
The “Thirteen Million Ringgit Plus” question is that how the hell could Khazanah give away 20.5% of a company’s holding with bigger network, higher standard of service, three times more operating revenue, stronger assets, lesser debts, more cash and better paymaster track record to another company with lesser track record, just because they make so much net money in shorter time?
By the way, will the new Malaysia Airlines BOD work with that ‘mix and match’?


  1. On paper dan ayat yang digunakan memang nampak cantik dan bagus..tetapi nampak macam ada yang meragukan.

    1) Kenapa Nilai pertukaran saham disandarkan berdasarkan nilai spekulasi bukan berdasarkan nilai aset dan hutang kedua-dua syarikat...cuba perhatikan pergerakan saham...semasa perbincangan sedang dijalankan saham Airasia meningkat naik dan dan saham Mas meningkat turun...ini bermakna bahawa ketika penentuan harga saham, saham airasia tinggi dan Mas rendah dan ini menjadi faktor utama kenapa Tune Air mendapat 20.5 peratus dalam MAS dan MAS cuma mendapat 10% dalam Airasia...dan selepas perjanjian itu saham Airasia turun (nilai pegangan khazanah turun tetapi saham MAS naik, nilai pegangan Tune Air Naik...Tony untung)
    2) Air Asia X mengalami persoalan tentang ketentuan dalam operasi masa depan mereka dan menjadi halangan dalam usaha mereka untuk menyenaraikan Air Asia X dan bagi mendapat harga yang baik, Perjanjian ini telah membantu Air Asia X memecahkan kebuntuan ini dengan mencanagkan kepada pelabur luar bahawa mereka mempunyai masa depan yang cerah terutama berjaya mematikan persaingan dari MAS, serta harapan cerah untuk mendapat hak pendaratan.

    3)Agak aneh apabila 2 pegawai Eksekutif Airasia , dilantik menduduki jawatankuasa Exco MAS. Adakah khazanah percaya dan yakin bahawa kedua-dua mereka akan membuat keputusan yang lebih menguntungkan MAS dari Airasia apabila perlu membuat sesuatu keputusan kritikal yang melibatkan kedua-dua pihak pernerbangan.Dimana dalam pihak perngurusan dan eksekutif tertinggi Airasia tiada ada seorang pun wakil MAS yang mempunyai kuasa untuk memastikan bahawa keputusan dalam Airasia tidak merugikan atau bersaing dengan MAS.

    2) Dari segi apakah yang MAS dapat manafaat dari AIRASIA, secara umum hampir semua bidang kolibrasi dengan nyata MAS mempunyai kelebihan berbandingan dengan Airasia.

    3)Adakah ini bermakna bahawa firefly tidak akan menjadi penerbangan komuniti tambang murah? Maka Airasia berjaya melenyapkan persaing mereka, dengan cara mengubah konsep syarikat penerbangan firefly dengan menggunakan cadangan datang dari khazanah atau Exco pengurusan MAS.

    4)Apakah perjanjian ini betul betul memberi manafaat kepada MAS atau lebih kepada menjadi tunggangan Tune Air untuk mencapai impian besar mereka.

    5)Sekiranya sekarang ini saya masih boleh berpeluang untuk terbang dengan menggunakan MAS pada harga yang lebih rendah dari Airasia dan mendapat layanan 5 bintang, adakah dengan perjanjian ini maka MAS hanya untuk mereka yang membayar harga premiuem sahaja? Adakah ini bermakna rakyat biasa sukar menaiki syarikat penerbangan negara melainkan membayar harga premium?
    6)Adakah firefly masih dibenarkan menawarkan harga tiket rendah seperti sekarang yang nyata lebih baik dari AIRASIA dan masih memberi khidmat dan layanan yang lebih baik dari AIRASIA.(Snack,minuman,check-in barangan,ketepatan waktu)

    7)Adakah perjanjian ini diadakan demi kebaikan MAS atau kerana kecekapan sesetengah pihak yang pandai melobi?

    8)Adakah Wakil Airasia didalam pengurusan MAS boleh berlaku jujur dan ikhlas untuk menguntungkan MAS dengan mengorbankan keuntungan peribadi, Kerana wakil Airasia akan mendapat lebih untung jika keputusan yang dibuat memenangkan AIRASIA, apalah dengan pegangan 20.5% dalam MAS jika dibandingkan dengan pegangan meraka dalam airasia, Ini jelas conflict of interest.

    Saya ucapkan selamat maju jaya kepada MAS, semoga MAS tidak diperkudakan oleh mana-mana pihak, dan keputusan ini dibuat setelah khazanah membuat penilaian sewajarnya dan bukan sekadar "budy-budy" arrangement.

  2. Terima Kasih diatas comment yang sungguh bernas.

    Teruskan perjuangan untuk membebaskan negara dari 'kronism' yang merosakkan nilai harta negara dan memeras rakyat malaysia (dengan monopoli airline).