'SUPREME RACE' UTUSAN needs a BAILOUT & Umno scared to end up owning 100%

According to an announcement filed by Utusan Melayu (Malaysia) Berhad (“Utusan”) at Bursa Malaysia[1] on November 12, 2013, Utusan is now proposing to undertake a renounceable two-call rights issue of up to 110,733,837 Rights Shares.

According to the Announcement, UMNO has made an irrevocable undertaking to subscribe for is entitlement together with the Excess Rights Shares, which will amount to approximately RM40 million.

It is also mentioned in the Announcement that UMNO does not intend to undertake a mandatory take-over offer (“MO”) for all the remaining voting shares in the Company after the Proposed Two-Call Rights Issue, and will be seeking an exemption from the Securities Commission.

Pursuant to Section 9(1) of Part III of the Malaysian Code on Take-Overs and Mergers 2010 (“Code”), an MO is triggered when an offeror:

1. Obtains voting shares or voting rights of more than 33%; or

2. Acquires more than 2% of the voting shares or voting rights of a target company in any period of six months.

Financial difficulties

UMNO currently holds 55,113,956 Utusan Shares, representing 49.8% of the voting shares in Utusan. Based on the indicative First Call of RM0.68, UMNO may hold up to approximately 53.1% to 67.2% of the voting shares in the Company upon completion of the Proposed Two-Call Rights Issue.

This represents an increase of more than 2% of the voting shares and there is no reason why UMNO should be exempted from the obligation to undertake a “MO”.

It is undeniable that Utusan is now having financial difficulties to sustain itself. As at 31 October 2013, the total borrowings of the Group amount to approximately RM195 million.

That’s why UMNO president Datuk Sri Najib and his Deputy Finance Minister Ahmad Maslan have recently tried to bail out Utusan by urging top government linked companies (GLC) to advertise more in Utusan.

Minority shareholders might be too happy to sell to Umno, who could end up with 100% stake

In view of the fact that Utusan’s circulation has been sliding down from 350,000 to about 178,000 a day in December 2012, and posted a net loss of RM15.8 million for the financial year ending Dec 2012 and a net loss of RM8.8 million in the first quarter of this year, some of the shareholders might be interested to accept the mandatory takeover offer.

UMNO is seeking an exemption so that it can support Utusan's bid to raise funds without further incurring interest costs. However, the sustainability of Utusan should not be at the expense of taxpayers’ money or minority shareholders’ interest.

SC must not grant them exemption from MO as it will be detrimental to minority shareholder rights. It will make a mockery of our capital market regulations and degrade the transparency and integrity of Bursa Malaysia and SC.

It will tell the financial community that special preferences continues to exist for UMNO and their cronies at the expense of minority shareholders and discourage investment in our capital markets.

Teo Nie Ching is the MP for Kulai