MAS shares to be ‘halted amid tie-up doubt’

The trading of the stock will be halted due 'a pending corporate announcement', according to a source.

KUALA LUMPUR: Shares of Malaysian Airline System (MAS) will be suspended from trading tomorrow, two sources said, amid speculation that the national carrier’s proposed US$364 million (RM1.1 billion) share swap with AirAsia will be cancelled.

Trading of the stock will be halted due to “a pending corporate announcement,” according to one of the sources, who declined to say if the share swap will be scrapped.

The second source said MAS will announce the cancellation of the deal with the budget carrier. Both of the sources have direct knowledge of the proposed share swap.

Speculation that the deal would collapse has grown in recent weeks as the plan encountered strong resistance from the 20,000-strong MAS union, which voiced concern that the tie-up resembled a takeover by AirAsia founder Tony Fernandes and his brand of aggressive cost cutting.

Under the deal announced in August, Tune Air, controlled by AirAsia’s Fernandes and his deputy Kamarudin Meranun, would take a 20.5% stake in MAS and two board seats. In exchange, state investment arm Khazanah Nasional, the majority shareholder in MAS, would hold 10% in AirAsia.

The deal, formulated by Prime Minister Najib Tun Razak and signed last August, was to help both carriers compete effectively against rivals like Tiger Airways and Singapore Airlines once the Southeast Asian open-sky policy comes into effect in 2015.

In February, MAS reported its worst-ever loss of RM2.5 billion (US$820 million) for 2011, shocking analysts who had expected the restructuring to limit losses.

MAS and government officials couldn’t be reached for comment today because of a national public holiday.

CIMB was the adviser for both companies on the deal, banking sources said.

-Reuters