The 2nd Great Highway Robbery In Progress?

The Malaysian Insider

Wednesday September 30 2009

Asas Serba to brief Najib on Plus acquisition

PUTRAJAYA, Sept 29 — A proposed RM50 billion takeover of Malaysia’s highway concessionaires has taken on a new twist with its promoters now cleared to brief Prime Minister Datuk Seri Najib Razak on their plans sometime this week.

Only a month ago, the plan appeared doomed after Najib publicly squelched the plan, telling reporters that state investment agency Khazanah “has no plans” to sell Plus Expressways. Plus is the largest of the country’s 22 highway concessionaire companies and Khazanah, through wholly-owned United Engineers Malaysia, holds 64 per cent of the highway firm.

Rising tolls nationwide have been massively unpopular and Najib’s administration had been looking for ways to solve what could potentially be a threat to his government’s popularity in the next general election slated for 2013. One way, which was being actively studied by the Economic Planning Unit, was for the government to take over some of the more busy highways including Plus.

According to the firm’s allies, Najib is now interested because Asas Serba’s bid could be cheaper than the government’s. In addition, its entry would mean that the government, which is facing a budget deficit, would walk away with money. Finally, Asas Serba’s allies argued that the government has no business getting involved in mature businesses and, instead, should concentrate on infrastructure projects that create new jobs and spin off new businesses.

The story began in May or thereabouts when Asas Serba proposed to the Works Ministry that it acquire all 22 highway concessionaire companies for a jaw-dropping RM50 billion. Asas is a private firm manned by four businessmen, two of whom are former senior executives of the former Renong conglomerate.

Before it was nationalised in 2001, Renong owned Plus Expressways, which manages a highway running down the length of Peninsular Malaysia. It is the largest and most profitable toll concession in the country.

Out of the 22 companies, only Plus is owned by the government with the rest being held by private firms, some listed on the stock exchange. Given that position, most analysts believe that Asas Serba’s bid hinges on the acquisition of Plus and Plus alone.

The firm’s allies said that Asas, if successful, would lower toll rates in perpetuity by 20 per cent in return for a longer concession period.

Still, the private firm would require funding which could be tricky without tacit government support. Moreover, Khazanah, which is chaired by Najib, is likely to oppose the deal. Plus is the crown jewel in the United Engineers group with free cash flows expected to rise to RM1.8 billion next year. — Business Times Singapore

See also Sarawak Headhunter's post "The 2nd Great Highway Robbery".