This article first appeared in The Edge Malaysia Weekly on November 4, 2024 - November 10, 2024
MALAYSIA Airports Holdings Bhd (MAHB) (KL:AIRPORT) has received approval from the Malaysian Aviation Commission (Mavcom) with regards to the RM10.79 billion privatisation offer from Gateway Development Alliance Sdn Bhd (GDA).
It is now pending feedback from the public until Nov 6. If cleared, MAHB would have fulfilled all the four pre-conditions set, paving the way for the privatisation of the airport operator.
The group has already obtained approval from the General Authority for Competition of Saudi Arabia (June 12), the Egyptian Competition Authority (Aug 6) and the Turkish Competition Board (Aug 19).
“Upon assessing the application, and pursuant to subsection 55(2) of Act 771, the commission concludes that the anticipated merger, if carried into effect, will not infringe the prohibition in section 54 of Act 771,” said Mavcom, which regulates economic matters relating to the civil aviation industry, in its proposed decision published on its website on Oct 28.
Section 54 of Act 771 states that mergers that have resulted, or may be expected to result, in a substantial lessening of competition in any aviation service market are prohibited. The anticipated merger concerns the proposed privatisation of MAHB by a consortium acting through GDA, which consists of Pantai Panorama Sdn Bhd, Kwasa Aktif Sdn Bhd and GIP Aurea Pte Ltd.
Mavcom noted that the anticipated merger will not significantly reduce competition in the relevant markets due to the existence of or further erection of barriers to entry.
“The mechanisms [are] in place, including the oversight by NSCM (National Slot Coordination Malaysia) and the commission regarding slot allocation, as well as the automated airport collaborative decision-making system employed by MAHB to enhance operational efficiency at Kuala Lumpur International Airport, and limits MAHB’s ability to manually override gate, runways and slot assignments,” it said.
Mavcom’s proposed decision is, however, subject to Pantai Panorama, Kwasa Aktif and GIP Aurea entering into a definitive shareholders’ agreement, which contains their key obligations in the shareholders’ agreement term sheet dated May 15 and the second draft shareholders’ agreement received by the commission on Oct 24. This is to ensure that post-merger, they will not engage in commercial activities relating to aviation services that infringe the prohibitions under Act 771.
Mavcom adds that pursuant to subsection 55(3) of Act 771, the proposed decision will remain valid for a year, effective from the date on which it is made final.
In May, Khazanah Nasional Bhd, the Employees Provident Fund (EPF), New York-based Global Infrastructure Partners (GIP) and Abu Dhabi Investment Authority (ADIA) — via GDA – announced a conditional voluntary offer to acquire the remaining 1.12 billion shares in MAHB that they do not already own at RM11 per share in cash. The offer was more than 6% higher than the stock’s last traded price of RM10.40 before the May 15 privatisation announcement.
Though MAHB’s share price had dipped to a low of RM9.60 in June due to uncertainty over the deal, the recent narrowing gap in the share price and offer price has raised hopes for the corporate exercise to succeed.
Indeed, analysts have been generally positive on MAHB’s privatisation, despite some political opposition to the deal. Proponents believe GIP as a partner would help transform Malaysia’s airports, as MAHB can benefit from substantial investment and strong financial backing.
Shares of MAHB have gained 42.1% year to date to close at RM10.46 last Friday for a market value of RM16.92 billion.
Looking ahead, all eyes will be on the acceptance level of the proposed privatisation. Currently Khazanah and EPF collectively own 41.107% of MAHB. Post-privatisation, Khazanah would own 40% of MAHB, the EPF 30%, with the remaining 30% by ADIA and GIP.
Still, the success of the privatisation is contingent on the total acceptance of at least 90% of the shares held by the consortium. Another substantial shareholder of MAHB is Kumpulan Wang Persaraan (Diperbadankan) (KWAP), which holds a 7.148% stake.
For the first half of the financial year ended June 30, 2024 (1HFY2024), MAHB’s net profit more than doubled to RM395.8 million from RM160.7 million in 1HFY2023, underpinned by higher passenger movements.
In the third quarter of this year, the group reported 36.1 million passengers, a 10% year-on-year increase and coming close to pre-pandemic levels.
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