Latest news with #Petronas-linked
New Straits Times
07-08-2025
- Business
- New Straits Times
The risks of corporate mergers and acquisitions
Bumi Armada Bhd and Petronas-linked MISC Bhd have mutually called off their proposed merger, ahead of the lapse of their memorandum of understanding on Aug 14. In a filing, MISC said its board was of the view that the proposed merger "would not fully achieve the intended strategic objectives" following evaluation and discussions. When announcing the proposal in November, the companies said the merger "will establish a Malaysian-based sector-focused entity which leverages the combined talent pool, project development and engineering capability, and know-how" of both firms Mergers and acquisitions Corporate mergers and acquisitions (M&A) are often portrayed as strategic moves that create synergies, improve efficiency, and enhance shareholder value. In theory, synergy implies that the combined value of two companies is greater than the sum of their parts. This can result from cost savings, increased market share, improved technology, or enhanced capabilities. However, in practice, M&As are not always synergistic. While some mergers do result in measurable benefits, many fail to deliver the promised value, and some even destroy it. The risks associated with M&A are numerous and complex, affecting financial performance, organisational culture, and strategic direction. Synergy: Myth or Reality? The idea of synergy is one of the primary justifications for M&A. There are generally two types of synergies companies aim for: cost synergies and revenue synergies. Cost synergies arise from eliminating redundancies, such as overlapping departments or operations, which leads to reduced expenses. Revenue synergies come from cross-selling products, expanding into new markets, or leveraging combined R&D. While these potential benefits are attractive, achieving them is far from guaranteed. Studies have shown that more than half of all M&A deals fail to deliver expected synergies. One of the main reasons is overestimation of benefits and underestimation of costs. Executives may become overly optimistic, miscalculating the challenges of integration or the real value of the target company. This leads to overpaying for the acquisition and realising too late that the expected gains are unattainable. Key Risks of Mergers and Acquisitions Cultural Misalignment One of the most underestimated risks in M&A is cultural incompatibility. Each company has its own set of values, communication styles, management practices, and workplace norms. When these differ significantly, integrating the two can be extremely difficult. A clash in corporate cultures can lead to employee dissatisfaction, increased turnover, and reduced productivity. For example, if a risk-taking startup is acquired by a conservative, bureaucratic corporation, innovation may stall, and key employees may leave. Integration Challenges The integration process involves aligning systems, processes, human resources, supply chains, and more. Failure to integrate effectively can lead to operational disruptions, delays, and customer dissatisfaction. Integration complexity increases with the size and geographic spread of the companies. IT systems, in particular, are often difficult to merge and can be a source of costly errors. Loss of Talent M&As can create uncertainty among employees, leading to fear of job losses, demotivation, or voluntary departures of key personnel. If critical leaders or innovators exit during or after the acquisition, the organisation can lose institutional knowledge and leadership, diminishing the long-term value of the deal. Regulatory and Legal Hurdles Mergers can attract the attention of regulatory bodies, especially in industries with limited competition. Antitrust investigations and approval processes can delay or even block a deal. Additionally, unforeseen legal liabilities from the target company, such as pending lawsuits or compliance issues, can negatively impact the acquirer post-merger. Financial Risk Many M&A deals are financed through debt. Over-leveraging can burden the newly combined entity with high interest payments and limited financial flexibility. If the anticipated revenue growth does not materialise, the company might struggle to meet its debt obligations, risking financial instability. Strategic Drift Companies often engage in acquisitions to pursue new strategic directions. However, if the acquisition does not align well with the company's core competencies, it may dilute focus and hinder overall performance. This is especially true when companies expand into unfamiliar industries or markets without adequate understanding. Market Reaction Investor sentiment can be unpredictable. If stakeholders perceive the acquisition as overpriced or strategically unsound, the acquiring company's stock price may fall. In some cases, the market reacts negatively even before synergies are evaluated, based purely on perception or scepticism. While mergers and acquisitions offer the potential for synergy and growth, they are not inherently beneficial or risk-free. The promise of synergy is often overhyped, while the risks—especially around cultural fit, integration, and financial strain—are downplayed. Successful M&A requires thorough due diligence, realistic assessments of value, and well-executed integration strategies. Companies that approach M&A with caution, transparency, and a clear strategic rationale are more likely to realise lasting benefits. However, without these, the likelihood of value destruction is high.
The Star
05-08-2025
- Business
- The Star
Trading ideas: Bumi Armada, Zetrix, Kelington, Kim Hin, Hibisucs, Johor Plantations, Ajiya, Tex Cycle, Pekat, Kimlun, Jiankun, Rimbunan Sawit, Ramssol
KUALA LUMPUR: Here is a recap of the announcements that made headlines in Corporate Malaysia. Bumi Armada Bhd and Petronas-linked MISC Bhd have mutually called off their proposed merger, ahead of the lapse of their memorandum of understanding on Aug 14. Zetrix AI Bhd said it will provide front-end solutions in future IT project collaborations with its 19.2%-owned Heitech Padu Bhd . Kelington Group Bhd is in talks with an unnamed client for a semiconductor hook-up project at a wafer fabrication plant in Dresden, Germany, potentially worth up to EUR50mn. The independent adviser for Kim Hin Industry Bhd , New Paradigm Securities Bhd, has advised minority shareholders against accepting the offer from chairman Chua Seng Huat to take the company private for 85 sen a share, calling it not fair and not reasonable. Hibiscus Petroleum Bhd , under its 2030 Mission strategy, wants to increase its net production rate to 70,000 barrels of oil equivalent per day by 2030 from 27,000 currently and raise its proven and probable reserves to 150mn mmboe from 84.9 mmboe as at end-January 2025. Johor Plantations Group Bhd has signed an MOU with YPJ Plantations Sdn Bhd and PIJ Holdings Sdn Bhd to improve and modernise the palm oil sector in Johor. Ajiya Bhd is disposing of two industrial land parcels in Nilai, Negeri Sembilan, for a total of RM51.9mn as part of its strategy to monetise non-core assets and strengthen its financial position. Tex Cycle Technology (M) Bhd has acquired Meridian World Sdn Bhd for RM42.8mn to the vendors, while an additional RM6.7mn retention sum was also paid to its solicitors. Pekat Group Bhd 's 60%-owned subsidiary company EPE Switchgear (M) Sdn Bhd has bagged a RM31.3mn contract from Tenaga Nasional Bhd to undertake switchgear equipment maintenance and repair works. Kimlun Corp Bhd has proposed a private placement to raise up to RM40.6mn to raise funds to meet the company's working capital needs. Jiankun International Bhd plans to issue shares to settle RM8.2mn in outstanding debt, which will result in subcontractor Crimson Power Sdn Bhd emerging as its new largest shareholder with a 30.1% stake. Rimbunan Sawit Berhad has announced the appointment of Datuk Tiong Thai King, 80, as its new Non-Executive Chairman. Ramssol Group Bhd 's 2Q25 net profit surged 42.5% YoY to RM6.2mn with revenue climbing 44% YoY to RM24.9mn, driven by robust demand for its human capital management and artificial intelligence cloud solutions.
Focus Malaysia
02-07-2025
- Business
- Focus Malaysia
Buying in tech, Petronas-linked counters pushes FBM KLCI to intraday high at the close
PERSISTENT buying momentum, mostly seen in selected technology and Petronas-linked counters pushed the FBM KLCI to record another intraday high at the close today, extending its rally to five consecutive trading sessions, an analyst said. Malaysian Pacific and Petronas Dagangan were among the top two gainers, rising RM1 and 44 sen to RM22.40 and RM21.70 respectively. At 5 pm, the FBM KLCI rose 8.68 points, or 0.56 per cent, to 1,550.21 from Tuesday's close of 1,541.53. The benchmark index opened 1.8 points lower at 1,539.73 and subsequently hit its lowest level of 1,539.18 in early trade. The broader market was broadly positive with 531 gainers outpacing 442 decliners, while 498 counters were unchanged, 920 untraded and 14 suspended. Turnover rose to 3.11 bil units worth RM2.38 bil against 2.05 bil units worth RM2.15 bil on Tuesday. —July 2, 2025
New Straits Times
27-06-2025
- Business
- New Straits Times
Sabah's SMJ Energy now worth RM5b after three years of operation
PUTATAN: Sabah's state-owned oil and gas company, SMJ Energy Sdn Bhd, is estimated to be worth RM5 billion based on its current asset value after operating for just three years. Sabah Finance Minister Datuk Seri Masidi Manjun said this was a significant achievement for a company that began with only RM50 million in capital from a state government injection when it was founded three years ago. He said the success was due to SMJ Energy's investments in Petroliam Nasional Bhd (Petronas)-owned companies. "As many are aware, and as we have explained and announced on several occasions, SMJ Energy was established following the signing of the Commercial Collaboration Agreement (CCA) with Petronas three years ago. "The state government provided us with RM50 million in seed capital, and from that, we went on to invest in Petronas-linked companies. "According to the latest valuation, this RM50 million company is now worth RM5 billion, with a sizeable portfolio of assets," he told reporters after launching Petagas Gabungan Rakyat Sabah (GRS) annual general assembly here today. Masidi, who is also chairman of SMJ Energy, was commenting on the current performance of the Sabah government-linked company (GLC). He said the achievement was the result of the hard work of professionals hired to manage and operate the company, without political interference. "Our operations at SMJ Energy are fully commercial; that's the key factor behind the company's strong performance. "In fact, last year alone we recorded a profit of RM350 million, managed by a team of just 30 professional staff," he said. Masidi said SMJ Energy now also holds a 50 per cent stake in a Petronas oil field through the Samarang Production Sharing Contract (PSC).
