UEM Sunrise-EcoWorld merger must not be at the expense of the rakyat

By ZAIDI ISHAM ISMAIL
editor@dagangnews.com

COMPANIES all over the world would sometimes merge with another company as part of their expansion plans. Some firms merge to become stronger, leaner, be part of a global brand, share resources, save money and become more efficient.

But some concerns also merge due to the wrong reasons.

As an example, company A which is profit making would acquire company B which is loss making. Nothing wrong with that as this corporate exercise is seen as a buying opportunity. But more often than not, this practice would be a bailout if company A is compelled to buy company B.

Now mergers and acquisitions is part and parcel of corporate exercises. Companies can fast track their growth by taking over another rival company which is speedier than an organic growth.

Malaysia's corporate scene is no stranger to mergers and acquisitions such as the amalgamation of 20 over banks in the country to 10 banks at present.

This is carried out to consolidate Malaysia's banking sector in the face of rapid globalisation.

Now this is a bonafide merger aimed at strengthening our banks to compete against other global banks. Another mega merger was the juxtaposition of the now defunct Golden Hope Plantations and Kumpulan Guthrie Bhd  to now become the global brand of Sime Darby.

So when is a merger wrongful and is at the expense of taxpayers money?

A merger is morally wrong when it is carried out to rescue cronies such as the scuppered Felda Global Ventures deal to buy Indonesia's PT Eagle High.

Another famous bailout, although denied by the government, is the on again, off again rescue of beleaguered Malaysia Airlines.

And now there is the on-going plans to merge UEM Sunrise Berhad and EcoWorld Development Berhad.
 

Now this merger could be like any other merger except for the fact that there has been a lot of negative flak and mudslinging on social media with regards to their "marriage."

There's too many issues to list here but suffice to say that some of the concerns on the merger include on who will lead the enlarged entity post merger.

Some question on social media EcoWorld's huge debt and if the merger is to create value, why not hold open discussions with other property firms such as MRCB or Sime Darby?

UEM Sunrise is 66% owned by Khazanah Nasional Bhd which in turn is the government's investment arm.

Khazanah is ultimately funded by the taxpayers money and so naturally it must weigh the pros and cons of the merger on the rakyat before proceeding.

UEM is also 7% owned by Lembaga Tabung Haji and 4% owned by the Employees Provident Fund. Ultimately, UEM Sunrise is partly owned by the rakyat.

EcoWorld in turn is a public listed firm founded by Tan Sri Liew Kee Sin and thus the merger without question must satisfy its shareholders.

Another case in point, UEM Sunrise is the custodian of huge tracts of Malay reserve land.

Federal Territories Umno Youth Mohamed Nizham Abdullah said whatever decision Khazanah makes especially on who will lead manage the enlarged firm, it must safeguard the interests of the Bumiputeras.

To be fair, UEM Group chairman Tengku Datuk Seri Azmil Zahruddin said the merger with EcoWorld will unleash it from Iskandar Puteri, Johor.

After the merger, the enlarged entity will be the biggest property outfit in the country and it will benefit immensely from EcoWorld's superior marketing and brand presence.

Maybank Investment analyst Wong Wei Jun said the merger will benefit both firms to ride over the COVID-19 slowdown.

We live in a world of enhanced corporate governance, high integrity and transparency especially now in the digital age where everything is open to scrutiny.

The deal will no doubt be examined by all and sundry and will be put under a microscope.

Which ever way, Khazanah, UEM Sunrise and EcoWorld must ensure that the benefits of the merger will trickle back to the rakyat. The merger cannot be done at the expense of the rakyat. - DagangNews.com

The writer is former NST Business editor