☕️ Corporate Malaysia: 1 day, 2 mega deals - Sime Darby x UMW, KLK x Boustead Plantations

1. NUMBERS AT A GLANCE 🔢

Malaysian’s optimism for the Unity Government’s direction is waning — from a high of 74% early in the year to 60% as of last month, according to a survey (n=500) by global market research firm Ipsos. Malaysians are currently worried about three things — political/financial corruption, inflation, and unemployment.

India leads the world in rice exports, making up around 40% of global trade in this staple. Key rice buyers include China, the Philippines, and Nigeria. Indonesia and Bangladesh are considered “swing buyers,” increasing imports during domestic shortages. In 2021, India exported 22 mil tonnes of rice to 140 countries. However, concerns about rising domestic prices prompted India to halt non-basmati white rice exports on July 20. This move has raised fears of soaring global rice prices, which have been steadily increasing since early 2022, experiencing a 14% rise since last June.

The "One Ring" card emerged as part of a "Lord of the Rings" crossover in Magic: The Gathering. This unique version, etched with the Black Speech from the films, had incredibly slim odds of 0.00003% (1 in 3.3 mil vs. Powerball’s 1 in 292.2 mil) to be found. Enthusiasm drove pre-discovery offers, with a Buffalo card shop proposing USD1 mil, later trumped by a USD2 mil bid from Spain. Based on a video posted on TikTok, Rapper Post Malone looks like the owner of the first seven-figure Magic: The Gathering trading card.

3. IN MALAYSIA 🇲🇾

66 years after the Independence and getting the bulk of the national budget, Malaysia is still trying to get education right

• Education Ministry stated that a new school curriculum is in the works and a total of 21 engagement sessions involving 1,600 stakeholders had been conducted nationwide. On top of that, an online survey on the School Curriculum Implementation 2026 will be up today until Sept 15. So, this is the time for you to be a contributing citizen of Malaysia by answering the survey here. For Budget 2023, RM55.2 bil has been allocated for the Education Ministry alone, the biggest beneficiary of the national budget, taking away about 15% of the budget.

• Deputy Education Minister Lim Hui Ying is brushing aside critics by saying that the newly introduced “Imam Al-Nawawi's 40 Hadith” module is only intended for Muslim students. The module will be taught in National Religious Secondary Schools and Government-funded Religious Schools and will gradually extend its implementation to other public schools. Previously, the Malaysian Consultative Council of Buddhism, Christianity, Hinduism, Sikhism, and Taoism (MCCBCHST) had called the teaching of the module unconstitutional as it argued that the module promotes the complete Islamic way of life, which they believe goes against the principles of religious freedom.

A day at the Courts

• On the first day of the trial of Rosmah Mansor’s RM7 mil money laundering and tax evasion trial, deputy public prosecutor Ahmad Akram Gharib told the court that even though Rosmah was not employed, she managed to deposit a huge sum of money, disproportionate to her means, into her Affin Bank account. Akram added that Rosmah utilised the service of the Seri Perdana Complex residential house manager, Roslan Sohari, to make those deposits on her behalf. The money will then be used to pay for the bills and credit card expenses of Rosmah and her family.

• In Zahid Hamidi’s Yayasan Akalbudi corruption trial, Zahid’s defence team is pressuring the Attorney-General office to give its verdict on the deputy PM’s bid to review his ongoing trial. The All-Star defence team led by Hisham Teh Poh Teik sent the letter of representation to the prosecutors twice, in December last year and another in January this year. Under the law, a letter of representation is a method for an accused to seek prosecutors to review the criminal case against him, such as dropping the charges or for the accused to plead guilty to a lesser charge.Talking about Zahid, the deputy PM laden with court charges still has the support of his party or at least from Wanita UMNO. Around 900 Wanita UMNO delegates were willing to make the trip to the party’s headquarters as a show of support for Zahid. He has been under pressure for UMNO’s lacklustre performance in the state elections.

• A former police chief who was stationed at the Cherating police station and Pahang police contingent headquarters was charged with 98 counts of accepting bribes amounting to RM31,400 in 2021 and 2022. The former policeman named Anuar Yaakol was accused of so many bribery charges that it took more than 40 minutes for the court interpreters to read out all of his charges. The amount doesn’t seem significant but it seems like the frequency is - he is alleged to have received between RM100 - RM2,000.

In an unrelated news and an update to yesterday’s news, Opposition leader Hamzah Zainuddin confirmed that his and his wife’s bank accounts had been frozen by the authorities. It was believed that the accounts were frozen in relation to the ongoing investigations by the Malaysia Anti-Corruption Commission (MACC) into the alleged RM15 mil corruption between Hamzah and businessman Sim Choo Thiam. As expected, Hamzah cried selective persecution by the Government to exert pressure on the Opposition.

Weekend Read: Corporate Malaysia’s two mega dealsOn one day alone yesterday, Malaysia’s corporate scene saw the announcement of 2 mega deals — Sime Darby’s (SD) acquisition of Permodalan Nasional Bhd’s (PNB) stake in UMW Holdings Bhd and Kuala Lumpur Kepong Bhd’s (KLK) acquisition of Boustead Plantation (BPlant) from Boustead Holdings Bhd (BHB) and Lembaga Tabung Angkatan Tentera (LTAT, which also owns BHB).

SD x UMWSime Darby Bhd is splashing RM3.57 bil to purchase a 61.2% stake in UMW from PNB. This deal will complement Sime Darby’s automotive profile, adding mass-market brands Toyota and Perodua to its portfolio alongside premium-to-luxury brands, namely BMW, Rolls-Royce and Porsche. This deal will be funded by bank borrowings and internal funds, and Sime Darby plans to delist UMW from Bursa Malaysia by making a general offer to acquire the remaining 38.8%.

With great market share comes great liability — although Sime Darby will be capturing up to 60% of the total domestic production volume, it will also absorb UMW’s debts totalling RM2.7 bil. Sime Darby’s group CFO Mustamir Mohamad stated that they intended to trim down UMW’s borrowing by selling its 50% stake in Ramsay Sime Darby Health Care Sdn Bhd and by disposing a parcel of land in Labu, Seremban.

 PNB lauded the deal as the move will consolidate two of the major auto players in the country and it is aligned with Putrajaya’s New Industrial Plan 2030. Under the master plan, the Government wants to position Malaysia as the automotive hub for the region and aspires to have more battery-electric vehicles (BEV) or fully electric cars sold in the country. During Q1 2023, Malaysia accounted for a modest 2.4% of all Battery Electric Vehicles (BEVs) sold in Southeast Asia.

View the complicated shareholding structure of these companies prior to this deal. 

KLK x BPlantIn another mega deal, Kuala Lumpur Kepong Bhd (KLK) will fork out RM1.15 bil to buy 33% and one share in Boustead Plantations Bhd (BPlant) via a tripartite strategic collaboration agreement (SCA) with BHB — which has a 57.42% stake in BPlant — and LTAT — which has a 10.59% stake in BPlant. Similar to the Sime Darby-UMW deal, KLK also intends to take BPlant private via a mandatory general offer (MGO) of RM1.55 per share, which is a 13% premium to its closing price of RM1.37 on Wednesday and a 19% premium to its net asset value of RM1.30 as at 31 Mar 2023. This offer price values BPlant at RM3.47 bil.

BPlant would be KLK’s and its parent company Batu Kawan Bhd’s third major acquisition within three years. Batu Kawan acquired PNB’s stake in Chemical Co of Malaysia Bhd (CCM) at the peak of the pandemic in March 2021. Then, KLK bought IJM Plantations Bhd from IJM Corp Bhd.

Bonus: MAG x Brahim’s - WIPNot a done deal but a work in progress. Malaysia Aviation Group (MAG) is mulling over the possibility of taking over Brahim's Holdings Bhd's in-flight catering unit Brahim's Food Services Sdn Bhd (BFS) for RM129 mil. An independent consultant, believed to be Deloitte, has valued the whole of BFS between RM162.8 mil to RM184 mil. Both BFS and MAG have not shaken hands on a new three-year in-flight catering agreement that is supposed to be finalised by the end of this month. At the moment, BFS is 70:30 owned by Brahim and MAG.

4. AROUND THE WORLD 🌎

Nvidia’s blowout earningsNvidia’s hit a record high following its forecast of record-breaking quarterly revenue and a USD25 bil buyback. For the quarter ending July 30, its revenue grew a staggering 102% (YoY) to USD13.51 bil, whilst its net income grew at an even more staggering rate of 835% (YoY) to USD6.1 bil, translating to a helluva impressive net margin of 45.5% — in other words, every 45.5 cents of USD1 revenue is pure profit. The chip maker is the rising tide that lifts all boats. Nvidia’s optimistic guidance triggered a surge in semiconductor-related stocks across Asia. Taiwan Semiconductor Manufacturing Corp, producing Nvidia's AI chips, saw its shares rise by 2.17%, and Samsung Electronics gained 1.64%. Nvidia’s market cap currently stands at USD1.2 tril.

Nvidia aims to triple production of its USD 40k H100 processor, driving the AI revolution. To catch up with the demand, the company aims to ship 1.5 to 2 mil units in 2024, up from 500k units this year. Saudi Arabia and UAE have reportedly purchased thousands of H100 units, while VC ( venture capital) firms are also purchasing GPUs (Graphic Processing Units) for portfolio startups.

BRICS welcomes six countries with open armsBRICS Group, composed of Brazil, Russia, India, China, and South Africa, has announced its intention to expand its membership, inviting Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates, and Saudi Arabia. It was reported earlier more than 40 countries have expressed their interest to join this bloc. BRICS’ move aims to diversify global power structures amid increasing polarisation. The inclusion of Iran, despite its tensions with the US, underscores Chinese and Russian influence over its three other west-friendly members. While the expansion provides financial strength and support for China’s agenda, it has yet to fulfil all of its goals, such as establishing a rival currency to the US dollar.

Slowly, but surely.

Wagner boss Yevgeny Prigozhin presumed ‘dead’ in plane crashYevgeny Prigozhin, the head of the Wagner Russian mercenary group, is believed to have died in a plane crash in the Tver region, Russia. The crash of a business jet resulted in the death of all 10 people aboard. While Prigozhin’s name was on the passenger list, it’s uncertain if he was actually on the aircraft. The 62-year-old paramilitary leader had led a brief rebellion against the Russian government earlier and later appeared to have reached an agreement with President Putin. The circumstances around the crash remain unclear, as the plane was en route from Moscow to St. Petersburg. Watch the crash here (warning - graphic).

Following this ‘accident’, a 2018 video clip of Putin’s interview resurfaced and went viral. When asked if one needs to be able to forgive, Putin said yes but not everything and mentioned ‘betrayal’. Connect the dots. 

Deals $$$

1. Fast fashion giants Shein and Forever 21 will be entering a partnership, with Shein acquiring a third of Sparc Group, which operates Forever 21. In return, Sparc will become a minority shareholder in Shein. This collaboration aims to expand Forever 21’s distribution on Shein’s global e-commerce platform with 150 mil users while also allowing Shein to test its product sales and returns in physical Forever 21 stores across the U.S. Forever 21 has more than 540 locations worldwide. The deal’s financial details were not disclosed.

2. Finally, done deal for Subway. Roark Capital is set to acquire Subway, ending the family ownership that has spanned over 50 years and heralding a new era for the struggling sandwich chain. The sale concludes a long process that began in February, with private equity firms ultimately competing in an auction due to Subway's high asking price of USD 10 bil. The transaction value was not officially disclosed, but reports suggest Roark’s final bid was around USD 9.6 bil. Roark, which currently holds numerous restaurant chains such as Dunkin’ and Baskin Robbins, plans to maintain Subway as a distinct entity in its portfolio.

Shorts

1. Lego to launch Braille-coded bricksLego is set to sell braille-coded bricks designed to aid blind and visually impaired children in learning the tactile alphabet. The toymaker, which partnered with blind organisations to develop the bricks, aims to promote shared braille learning among families and provide educational games for interactive learning.

2. China to be the first to ban seafood imports from JapanChina has declared a ban on all seafood imports from Japan in response to Japan's decision to release treated radioactive wastewater from the Fukushima nuclear plant, escalating tensions between the two countries. The release has sparked a feud between the two countries, with China describing it as a “selfish and irresponsible act.” China is Japan’s largest importer of fish and, crustaceans and mollusks, totalling USD860 mil in 2022.

3. Michael Jordan - the richest NBA legendBloomberg Billionaires Index has estimated NBA legend Michael Jordan’s wealth for the first time after the sale of his stake in NBA team Charlotte Hornets this month, pegging it at an estimated USD3.5 bil. The sale is estimated to be worth USD3 bil, with Bloomberg assuming Jordan is selling 65% of his stake and retaining a less than 5% interest. Jordan derived the majority of his wealth through one of the most legendary branding deals with Nike. Last year, the Jordan brand brought in USD5.1 bil in revenue, almost 11% of Nike’s total revenue and Jordan earns a 5% royalty on Air Jordan sales.

5. FOR YOUR EYES 📺

1. If you’re a sucker for home design videos, you should check out this channel (it’s based in Australia).

2. It's old but still relevant. If you don’t get it, the idea is just to invest in the S&P 500 index, do nothing instead of trading in and out, wait patiently and see your portfolio grow.

3. Dear readers, we are coming out of the closet, albeit a financial one. We identify as a transfinancial — a rich person stuck in a poor person’s body. We hope you can understand our situation, still accept us for who we are, appreciate us, and of course, support us here by subscribing! Happi weekend!