KUALA LUMPUR (Dec 21): Gateway Development Alliance (GDA), the consortium proposing to privatise Malaysia Airports Holdings Bhd (MAHB) (KL:AIRPORT), said it is maintaining its offer of RM11 per share, after the airport operator’s independent directors recommended shareholders to reject the offer.

In a statement, the consortium — comprising the Employees Provident Fund (EPF), Khazanah Nasional Bhd-backed UEM Group Bhd, the Abu Dhabi Investment Authority (ADIA) and Blackrock Inc-backed Global Infrastructure Partners (GIP) — said the views of the independent directors "fail to take into consideration MAHB's past performance and challenges it faces".

Earlier, all five MAHB independent directors said in a circular that there are no compelling reasons for shareholders to accept the offer, which they said does not reflect MAHB’s full potential, considering its positive financial momentum, growth strategy and potential value accretion if it remains publicly traded.

This as independent adviser Hong Leong Investment Bank (HLIB) recommended shareholders accept the offer, describing it as reasonable due to MAHB's prolonged suppressed share price, although the offer is below its independent fair valuation of between RM12.61 and RM13.71 per share.

In response, GDA said the prospects underlined in the rejection "are optimistic and unlikely to materialise without significant additional capital investment and an infusion of technical know-how".

MAHB’s prolonged underperformance, both operationally and financially, relative to peers suggests execution of its plans will remain a challenge.

MAHB "does not have a credible track record of delivery on its promises", it added, citing the suspended Aerotrain service, which MAHB had been working on replacing as far back as in 2017.

It also highlighted how MAHB had underinvested against peers, resulting in an ageing asset base that led to operational failures.

Concurrently, MAHB had lost its Asean aviation market share to just 16% in 2023, from 20% 10 years ago in 2013, it said.

"Noting the significant investments in new capacity being made by competing airports such as Changi in Singapore and Suvarnabhumi in Bangkok, MAHB is at risk of continuing to lose market share without a long-term capital investment and planning horizon which can only be achieved in a private environment," read the statement, which was issued by the EPF on behalf of the consortium.

The consortium added it is committed towards maintenance and upgrade of airport infrastructure, enhancing passenger service levels and improving airline connectivity.

From a valuation perspective, the consortium also flagged how its peers in the Asia-Pacific saw 18 times MAHB's market capitalisation growth in 2013-2023; as well as MAHB's dividend yield of 1% as opposed to its Asia-Pacific peers' average of 3%.

"MAHB’s importance as a strategic Malaysian asset is reflected by an increase in the combined ownership in the company by UEM Group (a wholly-owned subsidiary of Khazanah) and the EPF from the current 41.1% to a target 70%, while the government continues to retain its golden share," the statement read.

“The consortium looks forward to working closely with the aspiring talent at MAHB and is committed to restoring its competitive edge — by ensuring talent is properly rewarded in alignment with their contributions and achievements," it said.

"With its combined resources, control of the board and without the constraints of a public market listing, the consortium will be able to expedite necessary capital investments and provide the requisite technical expertise to realise MAHB’s potential, to the benefit of all stakeholders," it added.

GDA's RM11 offer was 5.77% higher than the stock’s last traded price of RM10.40 before the May 15 privatisation announcement.

The offer sees GDA forking out over RM12.3 billion for MAHB shares not held by the offering parties prior to the proposal announcement, and values MAHB at RM18.35 billion; at 12.5 times trailing price-to-earnings ratio or 2.25 times price-to-book ratio.

Prior to the takeover bid, Khazanah owned a 33.2% stake in MAHB, while EPF held a 7.9% stake. ADIA, on the other hand, had a 0.13% stake.

Shares of MAHB settled down 14 sen or 1.32% to RM10.50 on Friday for a market capitalisation of RM17.52 billion.