The offer price of RM5 represents 8.2% premium to UMW shares which closed at RM4.62 today. The deal, which values UMW at RM5.84 billion, will be funded by internal borrowings.
The conglomerate will also launch a mandatory general offer (MGO) for the remaining 38.8% shareholding and aims to eventually delist UMW from Bursa Malaysia.
The MGO is expected to cost about RM2.27 billion, Sime Darby said in a filing with Bursa today.
The acquisition is slated to be completed in the fourth quarter while the MGO is expected to conclude during the first quarter of 2024 (Q1 FY2024).
Shareholders’ consent will be needed for the acquisition, to be obtained via an extraordinary general meeting.
The total consideration for UMW implies a price-to-earnings ratio (PER) of 14.1 times and a price-to-book ratio (PBR) of 1.3 times, said the filing.
Prominent stakeholders of UMW include the Employees Provident Fund (EPF) with a 7.62% stake, and Retirement Fund Inc (KWAP) holding 9.13%.
UMW is a conglomerate with a diverse portfolio of businesses including automotive, equipment, aerospace, and manufacturing and engineering (M&E) segments.
Sime Darby group CEO Jeffri Salim Davidson said the acquisition is a strategic move to further scale up and strengthen its presence in the Malaysian automotive sector, adding two highly performing brands into its portfolio – Toyota and Perodua.
“As a partner of choice to some of the most admired brands in the automotive sector, we are very excited to have the opportunity to work with Toyota, one of the world’s largest and most respected automakers,” he said.
Strategies for UMW’s integration
On prospects, Sime Darby plans to conduct a comprehensive review of UMW’s businesses to strategise their integration, after the deal.
“The key objectives of the integration plan are to ensure continuity of UMW Group’s businesses, formulate action plans to realise anticipated synergies, harmonisation of systems and policies as well as aligning organisational cultures,” it said.
The group also aims to pinpoint strategic opportunities for optimising UMW Group’s operations by divesting non-core assets, including any competitive holdings that may need to be sold.
“Sime Darby wishes to highlight that the divestments shall be explored at the appropriate time and subject to acceptable terms,” it added.
Sime Darby targets 50% market share
With the acquisition, Sime Darby seeks to establish the group as a prominent player in the automotive industry, with the goal of capturing over 50% of market share in the country.
The move is anticipated to grant Sime Darby complete representation throughout the automotive industry, as it incorporates popular mass-market brands (Toyota and Perodua) to enhance its current collection of premium and luxury vehicles (BMW, Rolls-Royce, Jaguar, Land Rover, and Porsche).
“With increased contribution from Malaysia, the revenue mix of Sime Darby’s automotive business will be further diversified geographically with more balanced revenue contributions from Malaysia, along with China and Australia,” the group said.
The deal could also benefit Sime Darby through the incorporation of manufacturing and distribution capabilities to supplement its existing assembly and retail operations.
At the close, Sime Darby’s share price rose one sen or 0.48% to RM2.11, giving it a market capitalisation of RM14.38 billion.
UMW’s share price rose seven sen or 1.54% to RM4.62, valuing it at RM5.4 billion.