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Khazanah: Share deal between MAS-AirAsia officially off

Posted on May 3, 2012, Thursday

KUALA LUMPUR: It’s official now. Khazanah Nasional Bhd announced late yesterday evening that the share swap deal between Malaysia Airlines (MAS) and AirAsia Bhd has been called off.

“After eight months, our assessment is that, the cross-holding of shares has become a distraction to management’s efforts to turn around MAS.

“The cross-holding of shares was well-intended to simply better align the economic interests on the part of the major shareholders of MAS (Khazanah) and AirAsia (Tune Air),” the government’s investment arm said in a statement.

Having failed to get stakeholders’ support for collaboration, Khazanah said the parties
have agreed to unwind the cross-holding of shares and revert to the original structure of major shareholdings of both companies.

The unwinding of the share swap will see Khazanah transfer its 10 per cent or 277,650,600 ordinary shares in AirAsia back to Tune Air, which will transfer in turn, its 20.5 per cent or 685,142,000 ordinary shares in MAS back to Khazanah.

This transaction will be conducted based on the same swap ratio of 2.05 based on the prices at the time the share swap was announced in August 2011.

MAS was then valued at RM1.60 per share and AirAsia at RM3.95.

No cash will change hands, said the government investment arm.

Meanwhile, in separate filings to Bursa Malaysia, Tan Sri Tony Fernandes and Datuk Kamarudin Meranun have resigned from the MAS Board while Datuk Mohamed Azman Yahya has resigned from the AirAsia Board.

In August 2011, a Comprehensive Collaboration Framework (CCF) was established to enable MAS, AirAsia and AirAsia X to explore opportunities to co-operate on a broad range of areas, so as to leverage on their respective core competencies and optimise efficiencies.

As part of the CCF, Khazanah and Tune Air entered into a share swap agreement to align the interests of the primary shareholders of MAS and AirAsia, thereby, strengthening the potential for collaboration.

Khazanah Managing Director Tan Sri Azman Mokhtar said contrary to some reports, the CCF did not cause or contribute to the recent losses announced by MAS, as this was incurred well before it was in place.

“Neither did the government at any time cede control of MAS by virtue of its 49 per cent shareholding and the golden share,” he added.

Other than this, Khazanah had obtained from the Securities Commission, an exemption from the obligation to undertake a mandatory general offer for the remaining shares in MAS.

Meanwhile, Tune Air Director, Kamarudin said since the CCF was launched, there had been good progress in furthering the collaboration.

“Although the share swap has to be unwound, the collaboration over the past eight months has brought MAS and AirAsia closer. Ten years of non-collaboration and an unnecessary struggle between us, has come to an end and we are now able to focus on our markets and core competencies,” he said in a separate statement.

Following the reversal of the share swap deal, AirAsia, AirAsia X Sdn Bhd and MAS, have entered into a Supplemental Collaboration Agreement (SA) today to explore areas of mutual-need to realise savings and boost efficiencies.

The SA would focus on specific areas of collaboration, while continuing to comply with all relevant anti-trust laws, said AirAsia in another statement.

The signing of this SA was also part of preparations by Malaysia’s three biggest airlines to meet the challenges brought on by the Asean Open Skies, which comes into force in 2015.

Under the SA, the airlines have identified key areas for collaboration, which would result in efficiencies and cost savings, which among others, includes procurement, aircraft component repairs, training initiatives and technical and operational efficiency.

Additionally, the airlines will also continue working to further identify and evaluate opportunities to collaborate on a broad range of areas both at operational and strategic levels.

To push forward with the collaboration initiative, the three parties also signed memoranda of understanding (MoUs) to cooperate on two initial areas, joint procurement and aircraft component maintenance, support and repair services.

Fernandes said the procurement initiative between the airlines is expected to lead to efficiencies by exploring the potential of outsourcing their procurement activities to a mutually owned joint venture (JV) company, of which, key areas to be explored could include high spend items such as fuel, insurance, information technology and communications.

As for the aircraft component maintenance, support and repair services, he said the airlines would jointly explore the setting up of a JV, including identifying its viability and structure.

Meanwhile, MAS Group Chief Executive Officer Ahmad Jauhari Yahya said recovery of the business is the company’s main focus, along with initiatives to strengthen the balance sheet and operations through improved productivity, increasing revenue and lowering costs.

He said these efforts would translate into improved financial results.

“Collaboration is a game-changer in our Business Plan to build a sustainable business for the future.

“We will continue to drive these collaborations with AirAsia and AirAsia X as it will enable MAS to exploit potential synergies and efficiency gains. It is important to find ways to do our business more efficiently and with lower costs,” he said. — Bernama

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