Commercial or political?
One, if this is a commercial deal, then what is the return to MCA? Does it need the money anyway? If it has cash to put up for the purchase, then there is a possibility of a commercial consideration.
But to put up a 100 percent in borrowings to buy something, even a junior merchant bank officer can tell you it will never work.
I really wonder why a highly-regarded bank like Public Bank actually approved a 100 percent loan. No matter how much the shares are worth on paper, a prudent banker would have asked for some equity put in. I am sure Public Bank knows that in a selldown, Huaren's block of Star shares will be worth much, much less than its paper value.
Of course, MCA also talks of a selldown of Nanyang. Who would buy at a higher price than MCA when MCA controls the public-listed company? Don't forget that the RM5.50 includes control of the directors' board and management. I believe they can place the shares at a lower price, provided there is no arm-twisting by the MCA top guns.
But for MCA to sell a controlling block at higher price and give up the board and management control, how much higher would it take?
Don't forget, all eyes are on this deal; once you buy above 20 percent and have control, you can't run away from a general offer. Worse, MCA might throw the balance of its shares to that buyer in the general offer. So I doubt there will be any serious party/person/group that will offer higher than the RM5.60 proposed by Tan Sri Lim Guan Teik and Co.
As for the return, I doubt Nanyang can generate dividends faster and higher than the bank's interest. So, the only way for MCA to come out clean and alive is to have a buoyant market where fools go rushing in to bid the shares beyond its fundamental value. Investors are much smarter nowadays after getting burnt over the last few years. I guess readers can also make a better financial analysis than I have here.
Now, let's get to the political angle. We all know newspapers can shape and control what they want the world to read. Just look at Australian papers. They always 'bash' up Dr Mahathir Mohamad and Malaysia; consequently, their readers have formed an unfair view of Mahathir and our country. But the general population have actually met nice Malaysians but can't get their opinions heard through the papers. This is just an example of how a newspaper can shape one's opinions and views on certain matters.
Nanyang Siang Pau and China Press have been 'bashing' up Dr Ling's image because of his son Ling Hee Leong's corporate manoeuvres and there are actually lawsuits involving the latter and his company Linksun. Furthermore, Hee Leong's company Rekapacific Bhd is the prime and first candidate that KLSE wants to delist.
Such incidents have caused a lot of embarrassment to Ling and MCA.
The Chinese have helped Mahathir and Barisan Nasional to win in the last election. And Malay support for the PM is eroding by the day. If the Chinese vote swings, BN may be gone and Mahathir will go down as the PM who lost it for BN and everybody will remember him for that despite all the good things he as planned and done for us. Therefore, it is important that Mahathir and his partners maintain some control of the Chinese by shaping their minds and views through these newspapers. The others are not really a problem as they will toe the line.
Another glaring fact about Nanyang is that it was controlled by Tan Sri Quek Leng Chan, who was perceived to be a supporter of Anwar Ibrahim. We all probably feel that if Anwar were to be released today and allowed to challenge Mahathir, it would be a close fight. And if Nanyang is allowed to 'support' Anwar, it is a sure win for Keadilan.
As far as I can see, if Mahathir says no, MCA and Ling will not dare to proceed with the acquisition.
Well, let's see how the EGM goes this Sunday, or might it get cancelled at the last minute?
