opinion

First we were told it was simply a business transaction. Then it became a strategic political manoeuvre. Either way, it is a dead cat.

First let us examine the purchase as a business transaction. There are readers, or at least there were readers. And there are advertisers, or at least there were advertisers. The readers and the advertisers pay money to the business. The total sales should be enough to cover the salaries of the employees and the cost of the newsprint.

Buying a business with your last cent is risky, because there should be some capital left to operate the business. Buying a business entirely with borrowed money is less risky, unless you plan to pay it back. If you don't, that is a problem for the lender. Lending money to buy a newspaper has its risks. Lending ALL the money to buy a newspaper carries a lot more risk. Having a federal agency at hand willing to assume a rotten loan removes this risk.

The Malaysian people do not know what happens to their money. It is kept from them as an official secret. And when on the rare occasion they find out, they only stay mad for a few days. And the thieves get to keep the money, no thanks to the party-in-power and the prime minister, who has castrated the police and the Anti-Corruption Agency. Don't ask the finance minister. He has turned in his croupier and gone jet-setting. But that is tangential.

Low return

A business that is making a profit, and is expected to continue making around the same profit, can be evaluated on the basis of its earnings. In this case the newspaper is earning around RM4 million per annum. Risk-free bonds will return over 5 percent with no management required, so a reasonable expectation would be a return of 10-12 percent on the invested capital. The present earnings represent a 10 percent return on RM40 million, so that is a fair starting price to offer. If you hold out for a better return, then the price would be less.

The price paid (or nearly paid, so it seems) is said to be RM230 million, and this is for only about 73 percent of the shares. If all the shares were bought, the total price would be around RM310 million. This amount of money is spent to buy a newspaper that is returning RM4 million annually. The rate of return is in the neighbourhood of 1.3 percent. A return that low is not an attractive business deal, and anyone who tries to tell you it is has been too long at his cup.

The interest on the bank loan will be at least RM15 million per year, with no payment on the principal. You may well wonder where this is to come from. At this point the simple business transaction requires additional capital input of at least RM10 million per year, and perhaps twice or thrice that.

The man who sold the newspaper is laughing so loud he can be heard from Hong Kong to Kuala Lumpur. He not only has the cash from the sale, he has paid out the retained funds (about RM45 million) in the form of a special dividend, 73 percent of which he is the direct beneficiary.

No one can say what the lender is thinking, but it is easy to guess. As collateral for the loan the lender has taken The Star newspaper, along with the new newspaper shares. Since it is unlikely that the buyer will be able to pay the interest, much less the principal, the lender has an excellent chance to get the bundle for a song.

Pure misery

As a business transaction, the purchase is excellent for the seller and the lender. For the buyer ... well, he must be using someone else's money. Every buyer is happy twice, once when he buys and once when he sells. In between it often is pure misery. In this case there is perhaps more misery than average.

But now we are told it is a strategically important political decision. The justification is to be political. That means the buyer is a politician, and he has something in mind of a strategic political nature. It is worthwhile looking to see what that might be.

Relieved of any necessity to make financial sense of the purchase, we may turn our attention to what he now confesses to be his real motivation. It is possible he wishes to educate the editorial staff to the admirable principles of his party. But no, he has sent them all packing.

Perhaps he wishes to persuade the writers to prepare favourable stories for the readers. But no, he has not discussed this option with them, and being suspicious of his future interference into their creative freedom, they have all quit. Never mind. New editors and writers can be brought over from The Star . They are seasoned and supple there.

We are left only with consideration of the readers. Will the readers understand the subtle manoeuvrings behind the purchase, now revealed to be a strategic political move? For many the answer is a clear No! These readers have bolted, rejecting the idea out of hand. Along with them have gone the advertisers, protesting against what is seen as tampering with the typesetters. Whatever has happened to the docile Chinese?

If the editors can't edit, the writers won't write, and the readers won't read, it is difficult to understand how the shrewd political ploy is to work. And if the advertisers remove their support, the price is probably going to be a lot more than presently contemplated. This is because the readers and advertisers of The Star are also alienated by this masterful political chicanery.

The members of the political party are being called together in one room tomorrow to give their approval, both for the purchase and for the loan. It is not clear whether their approval is sought on the basis of the business transaction or the strategic political maneuver. This is an option of their leader, Ling, a man with long and wide experience in the handling of Chinese money.

Green light

The raucous outcry over the purchase is completely unexpected, says one seasoned political veteran. "I gave it the green light," he says. "We bought a Malay paper a few years ago, and the Malays never said a word." The Chinese, it seems, have been stirred, somewhat as a nest of hornets might be stirred, by public characterisations as "terrorists and communists".

They have been denounced as unpatriotic for defending their school properties, and ungrateful for demanding an accounting of public donations intended for relief of Chinese pig farmers. Fondling the favourite newspaper is the final affront.

The leaders of the party are seriously divided over the entire issue, and there is to be a bloodbath later, no matter how the newspaper purchase goes. For the members, if they support the purchase they are buying a dead cat at a ridiculously high price, one they cannot afford. To do this they are putting their prize possession, The Star , at risk.

The purchase is to require large sums of money for years into the future. All this for what? Will the readers ever return? Will the advertisers revolt against sister newspaper, The Star , also? Will the new newspaper bring back the Chinese vote, as planned? Will a vote of approval mean the bankruptcy of the MCA?

Yet if they vote to kill the transaction, there will be a personal price to pay. The leader, Ling, will be rebuked, and probably he and all his friends will eventually be forced from the MCA. The party itself will lose further face with the Chinese community and Malaysians in general.

The ministers who oppose the purchase have been told their fate is sealed. They must succeed to survive. They appear to have the Chinese community behind them. The BN cannot survive without the Chinese vote. For the party-in-power it is a desperate and serious situation. It will be an interesting meeting.

HARUN RASHID is a scientist avidly interested in the application of Islamic principles in international affairs. The promotion of goodwill through civilisational dialogue motivates his writing. His Worldview column is a personal analysis of Malaysian affairs from a global perspective.