Malaysia could see a flurry of merger and acquisition (M&A) activity in the coming months as the government looks to pare down direct ownership in companies to raise funds, the chief executive of CIMB Investment Bank said.
Bankers see opportunities in transactions that could emerge from sovereign wealth fund Khazanah Nasional’s portfolio rebalancing, or at other government-linked investment companies, Kong Sooi Lin said.
“That’s where opportunities for us investment bankers are, whether in the advisory or M&A side. We are beginning to see traction in these two areas. We are seeing foreign firms making a lot of queries, looking for good assets to buy in Malaysia,” she told Reuters in an interview yesterday.
Finance Minister Lim Guan Eng said on Tuesday that the government would reduce its equity ownership in companies to raise funds to pay down the country’s debt.
The new government led by Dr Mahathir Mohamad, who unexpectedly won a general election in May, has blamed the previous administration of Najib Razak for taking the country into debt of around RM1 trillion, partly as a result of 1MDB, a failed state fund which is now the focus of corruption and money laundering investigations.
Kong said there was no indication as to which sectors would be the focus of Khazanah’s portfolio rebalancing yet, “but it won’t be a cheap sale, they don’t need to sell cheap”.
M&A activity in Malaysia slowed in the past two quarters, industry executives have said, in the lead up to the May elections and on lingering uncertainties following the shock change in government.
Kong said promising sectors for M&A are consumer, healthcare, e-commerce and logistics, while consolidation in the oil and gas sector could be timely as oil prices have crept up.
Khazanah owns significant stakes in some of Malaysia’s largest companies such as CIMB, national utility firm Tenaga Nasional Bhd, regional telecommunications group Axiata Group Bhd and IHH Healthcare Bhd.
Kong also said there could be streamlining of some of the government-linked investment companies’ assets overseas.
“Property assets for divestment through M&A is something that will happen,” she added.
Kong said 2019 would likely be a better year for big initial public offerings that were in the pipeline, following a muted 2018.
Malaysia’s largest fast-food operator, QSR Brands, was looking to raise RM2 billion in an IPO targeted before the end of 2018.
Poultry business Leong Hup International was also working on IPO plans to raise as much as US$600 million, sources have said.