Minority shareholders to decide Malaysia Airlines privatisation

PETALING JAYA - Today is crunch time for Khazanah Nasional Bhd, as minorities go to vote at an extraordinary general meeting (EGM) to decide if they favour the privatisation of Malaysia Airlines (MAS).

The Government agency, which has a 69.37 per cent equity interest in MAS, needs the minorities to vote in favour of its plan for it to be executed.

Whether minorities share Khazanah's sentiments will be known later in the day, but Khazanah is offering an exit from MAS at 27 sen a share, or totalling RM1.4 billion (S$542 million).

This will be MAS' most important EGM ever in its corporate history, as its fate will be decided by the minorities to enable it to start afresh in July next year.

Most of the broking houses have been advising their clients to take up Khazanah's offer.

Apart from Khazanah, the next 29 biggest shareholders in the airline only hold 6.57 per cent of its total shareholding base of 16.7 billion shares. This means 24 per cent or four billion shares are in the hands of minority shareholders that also include MAS employees.

Khazanah needs at least 50 per cent in numbers and 75 per cent in value acceptance for its proposed selective capital reduction and repayment exercise to go through. If the nod is obtained during the EGM today, then the shareholders will get their cash repayment before year-end.

Apart from that, Khazanah also needs 90 per cent acceptance from shareholders to de-list MAS from Bursa Malaysia.

Khazanah had on Aug 30 unveiled a radical plan to overhaul the ailing airline. This came after four unsuccessful attempts to save the airline and the tragic events of MH370 and MH17 had further exacerbated its difficulties.

This prompted the Government to give Khazanah the go-ahead to overhaul MAS and set it on a more sustainable footing once and for all.

Among other things, Khazanah will take MAS private, cut 6,000 jobs, reduce the scale and size of MAS, renegotiate new terms with suppliers and set up a new company to take over the operations by July 1, hopefully leading to the closure of MAS' legacy issues.

The independent advisor, AmInvestment Bank, had earlier said it found Khazanah's buyout offer "fair" and "reasonable".

While today is a critical day to push for the privatisation - the first step in the remaking of MAS - internally, the airline is seeing several teams of consultants compiling data.

"About 100 people from the various consultancies are talking to employees and various division heads to compile information as to what each and every employee does in terms of job scope and what each unit is accountable for," claimed someone in the know.

Some of the consultants include CIMB Group, Ernst & Young, Seabury Group and Hays Group.

This data-compiling exercise will then determine which of the employees need to be axed, and who can be transferred to the new airline. At the same time, some effort is being made to talk to suppliers to determine who is willing to remain as a supplier to the new MAS come July on possibly new terms.

"Whether all this is done transparently remains to be seen," the source said.

While all this is being done, Khazanah is also looking for a new chief executive officer to take over the new MAS from July onwards.

The source also added that a board meeting had been held some two weeks ago to decide whether to renew the contracts of some of the management heads at MAS whose contracts are coming to an end at the end of this year and early next year.

MAS' challenge, which has made it an ailing airline, is that it spends more money than it makes. The Government has invested RM17.4bil in the airline, and about RM12.6 billion has been raised from equity and debt capital markets since 2009.