Proton- finally sold!

They say that the best time to eat a humble pie is when it's warm. I will admit, I was wrong about the Proton sale. Khazanah has agreed to sell its 42.7%-stake in Proton to DRBHicom at RM5.50 a share.There will also be a MGO by DRBHicom. Proton closed at RM5.18 on Friday. For more, go here & here.

There will be some questions raised about the proposed sale. The first question would be whether Khazanah should have a more transparent process to sell its stake in Proton. By limiting your choice of buyers, you are not getting the best people to takeover the sick national car project. Would Proton improve or would it get worse after the sale? If it get worse, do we have to bailout the privatized Proton?

The second question is whether Proton will continue to enjoy subsidies as well as protection from imported cars? It was reported that Proton received subsidies totaling RM416 million in FY2008-2010 (here). The reason that Proton enjoys this subsidies is because it belongs to Khazanah. It should not be entitled to subsidies once it has been privatized.

The third question to ask is whether Khazanah could have obtained a better price for Proton. The way the sale was carried out, it would only guarantee that Khazanah will not get the best price and obversely, the buyer will get a good deal. As I see it, Proton is a classic case of a company that is worth less than the sum of the parts. Since DRBHicom bought Proton at a very low price, it can easily strip the company off its excess assets, such as its land in Shah Alam. The sale proceed can be applied to pay down its debts. It would then run a leaner operation at a decent profit, especially with government subsidies to tap on.

Finally, the biggest question to ask is why DRBHicom, a group owned by Syed Mokhtar? This businessman has acquired many assets & businesses that belonged to the government over the past few years, from ports to airports, and from postal service to Proton car distribution (and, now Proton car production). It was even picked to takeover Bernas (after a Hong Kong-based company, Wang Tak Co Ltd secured controlling stake in Bernas) & the sugar refining business of Robert Kuok. Why is Syed Mokhtar getting the preferential treatment?

Imagine how much Malaysia could have benefit if we have sold off Proton years ago to the highest bidder? In 2005, VW approached Khazanah to buy over its stake at RM10 apiece (here). In addition to getting a higher price & not having to pay for the subsidies to Proton for the past few years, Malaysian car buyers could have enjoyed lower-priced cars; thus each family would have saved tens of thousands of ringgit. Then, our automotive sector would have been opened up and we could have hundreds of feeder factories set up in Malaysia, employing thousands of graduates & vocational school leavers. All in all, Proton has been a heavy burden for Malaysians from all walks of live. Even after the sale of Proton to DRBHicom, I doubt whether we see the end of this saga.