The much-anticipated sale by aviation holding company Naluri of its 29% of Malaysia Airlines (MAS) has finally been agreed, with the Malaysian government pledging to buy back the stake for 1.792 billion ringgit ($472 million).
Announced at the end of December, the deal was immediately criticised by analysts and some politicians, who said it amounted to a bailout for former investment banker Tajudin Ramli, who controls troubled Naluri and is close to Malaysian prime minister Mahathir Mohamad. Since the sale announcement there have also been growing signs that the government has changed its mind about selling a minority holding to a foreign carrier. The plan had been discussed for some time and SAirGroup, Qantas Airways and KLM were named as potential investors.
Under the December deal, the Finance Ministry will pay 8 ringgit per share for Naluri's 224 million shares in the loss-making airline's parent company. It is the same price at which the government sold the stake to Naluri, then Malaysia Helicopter Service, in 1994, and represented a premium of 117% over the closing level of MAS shares before the deal was confirmed.
While the government has denied that the deal amounts to a bailout, it is clearly positive for Naluri. The company is heavily in debt and said, in announcing the sale, that it was "not in a position to provide financial resources to further invest into the national carrier".
MAS has posted losses for each of its last three years and is expected to make a loss for the current year ending 31 March. It has debts of over $2.5 billion.
Although the sale has been criticised by many, Tajudin's imminent departure from MAS is generally being welcomed, primarily because he has failed to turn the carrier around despite the continuing recovery in regional economies.
However, analysts say much work is needed to improve the financial position of MAS but the government's resolve is in question. When all paperwork related to the Naluri deal is signed early in the second quarter the government will control well over 50% of MAS.
Local reports say that an advisory body is split on whether a sale to a foreign party "would best serve the nation's interest". Days after the Naluri deal was announced, prime minister Mahathir played down talk of a stake sale to a foreign carrier, saying MAS had to continue to meet "social obligations".
Source: Airline Business
