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HALIM MAZMIN EYES STAKE IN GMV 

26 April 2002

       

    

SHIPOWNER Halim Mazmin Bhd has proposed to acquire state-owned Bank Industri & Teknologi Malaysia Berhad's controlling stake in the shipping venture capital investment holding company, Global Maritime Ventures Berhad (GMV).
 
Bank Industri holds 90 per cent stake in GMV, which has a paid-up capital of RM500 million.
 
According to those familiar with the plan, the Economic Planning Unit has approved the bank's proposed relinquishment of its 450 million shares in GMV to Halim Mazmin, a KLSE Main Board company.
 
As a holding company, GMV has a 70 per cent stake each in 12 shipping companies; a 30.7 per cent stake in Malaysian Bulk Carriers Sdn Bhd (which owns 19 vessels) and a 30 per cent stake in ship-management company Wawasan Bulk Carriers Bhd. In 2000, GMV registered a profit of RM38.8 million.
 
In what appears to be a tightly wrapped deal, Halim Mazmin has been given a grace period of six months, beginning this month, to complete a due diligence exercise and execute the plan. A formal offer must be made by year-end.
 
Early this month, sources said, Bank Industri appointed Halim Mazmin as the management company of GMV to supervise its management, operation, businesses, assets and day-to-day administration until year-end.
 
Halim Mazmin's assistant general manager Othman Samat has been stationed
in GMV since last Monday to commence duties.
 
The larger implication is: It effectively entitles representatives of Halim Mazmin to be on the board of the 12 shipowner companies in which GMV holds 70 per cent equity interest.
 
With so much trade secrets in the open and, possibly, to uphold the integrity of the due diligence exercise without compromising the interest of all the companies related to GMV, an agreement to keep all matters in strict confidence was struck in March, the sources said.
 
But according to a Singapore-based shipping agency executive who claimed the plan was afoot since late 2000 and known to Singapore's shipping community, Halim Mazmin's appointment as GMV's manager is as good as taking over the company. "The shipping community has been expecting this," he said.
 
It cannot be ascertained how much Halim Mazmin must fork out for the purchase.
 
The value of the 450 million shares will depend on the result of the due diligence exercise on GMV, its subsidiaries and associate companies.
 
Sources in the shipping community said the offer bandied about in the first round of discussion last year was a discounted price of RM260 million, a price that apparently incensed officials of the bank and GMV.
 
But sources in the financial community said one of the prices suggested was between RM450-480 million, which would give roughly six sen premium per share.
 
Some quarters in the shipping industry question the logic of the proposed acquisition, arguing that since GMV is not an ailing company, there is no reason for Bank Industri to sell off its shares in the latter.
 
Quarters in the pro-acquisition camp said GMV recorded losses in earlier years. GMV made a profit of RM38.8 million at group level for the year 2000 compared to a loss of RM21.1 million in 1999. In 1998, it suffered a loss of RM4 million at company level and a profit of RM4.8 million at group level. Financial results for the year 2001 will be released during its AGM on May 21.
 
But people familiar with GMV said the loss in 1999 was due to realised exchange losses. The loss in 1998 was attributed to the fact that the then three-year-old company had no operating income.
 
"Many forget that GMV is only a holding company, not a shipowner or operator. Its principal business is capital injection in shipowning companies to increase Malaysian flag tonnage. And it relies on dividends for its income," said a banker.
 
GMV had been criticised by some shipowners for ploughing investments in what they alleged to be companies fronting for foreign shipowners which was denied. 
 
GMV holds a 70 per cent equity in Wawasan Shipping Sdn Bhd (which has 22 ships). The remaining 30 per cent is owned by IMC Singapore, a subsidiary of Hong Kong-based International Maritime Corp belonging to the family of shipping magnate Tan Sri Frank Tsao.
 
GMV holds 30.77 per cent equity in Malaysian Bulk Carriers Sdn Bhd (MBC), the second largest shipowning company in Malaysia after Malaysian International Shipping Corporation. Malayan Sugar Manufacturing Sdn Bhd holds 20 per cent with the remaining 49.23 per cent by Brown Sugar Co Ltd, which is associated with Singapore-based Kuok Group (owner of Pacific Carriers).
 
Early this year, Bank Negara Malaysia and the Auditor-General had inspected GMV's accounts and related documents. Sources said no irregularities were found, quashing rumours that GMV was mismanaged. The Anti-Corruption Agency came in March only to confirm the findings of BNM and the AG, they said.
 
The rumours were fuelled by talk of Halim Mazmin entering GMV for a due diligence exercise, they said.
 
Sources said plans were afoot to list GMV's subsidiary, Glory Incentive Sdn Bhd (which holds 70 per cent in five shipowning companies), on the Second Board early next year.
 
Some industry players contend that with a market capitalisation of RM19 million, Halim Mazmin will need to raise funds to buy Bank Industri's 90 per cent stake in GMV. Speculation abound on how the funds would be sourced.
 
This question is unlikely to deter Halim Mazmin which has a commendable record of successfully navigating through storms and choppy seas. Despite the soft dry and liquid bulk market, its profit continues to rise. For the financial year ended Dec 31, 2001, Halim Mazmin turned in a net profit of RM23.15 million compared with RM11.61 million in 2000.
 
Industry observers noted its business savvy in negotiating another difficult situation.
 
In 1993, Halim Mazmin's 100 per cent subsidiary Prima Mutiara Sdn Bhd had secured a 10-year Perwaja Contract of Affreightment (COA) for the shipment of iron ore pellets from Chile, Brazil, Sweden and Bahrain. It involved three bulk carriers of 145,000 dwt each and another vessel of 65,000 dwt. But the problems surrounding Perwaja threatened to idle the ships.
 
However, Prima Mutiara was able to clinch a long-term contract with Tenaga Nasional Berhad's subsidiary, TNB Janamanjung Sdn Bhd, to ferry coal for the station last year. This is a relief since an immobile 45,000 dwt vessel would incur a daily maintenance cost of US$10,000 (RM38,000).
 
Industry observers said the GMV acquisition bid is part of an aggressive expansion plan that would transform Halim Mazmin executive chairman and managing director Tan Sri Halim Mohammad into Malaysia's shipping czar. It would put Halim Mazmin on the forefront of the shipping industry, eclipsing even MISC, they said.
 
As the skipper of Halim Mazmin, Halim has an impressive performance track record in the local shipping industry. The company rose from humble beginnings in Terengganu in 1982 as a ship agency known as OHM Maritime Sdn Bhd to become the first local player to have gone international.
 
GMV's minority shareholders comprise OCBC Bank (Malaysia) Bhd, Prudential Assurance Malaysia Bhd, Mezzanine Centres Sdn Bhd, Southern Bank Berhad, Affin Bank Bhd, Alliance Bank Malaysia Bhd, EON Bank Bhd, HSBC Bank Malaysia Bhd, Hicom Holdings Bhd, Pahang State Government and
Bumiputra-Commerce Bank Bhd. 

   

          

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