NSTP-Utusan merger in the offing

The New Straits Times Press (Malaysia) Bhd (NSTP) and Utusan Melayu (Malaysia) Bhd may be on the verge of a merger to create the country’s largest media group.

Sources said the proposals, which were first initiated about six months ago, had been set into motion and it was learnt that Utusan’s board will meet today to discuss the matter.

Under the proposed merger, NSTP and Utusan will be de-listed and their current shareholders will be offered new shares in a new entity, based on the companies’ book value.

It is learnt that due to the higher value of NSTP’s net tangible assets (NTA), its shareholders may also benefit from a cash payout from the new company.

This will pave the way for Media Prima Bhd, which holds 32.94% of NSTP, and Umno, which owns 50.46% of Utusan, to jointly control the new entity.

When contacted, Media Prima chief executive officer Abdul Rahman Ahmad declined to deny or confirm the speculation.

“We can’t comment at this juncture; we are always looking for ways to create shareholder value in NSTP.

“There has been a lot of speculation. At this point, it is just rumour,” he told FinancialDaily on Nov 27.

NSTP’s NTA per share at Sept 30, 2006 was RM4.12 and Utusan Melayu’s amounted to RM2.06 at end-July 2006. NSTP and Utusan have a paid-up capital of RM217.23 million and RM109.22 million respectively.

Yesterday, NSTP’s share price rallied 24 sen or 10.67% to close at RM2.49, its highest in nine months. A total of 2.59 million shares were transacted at prices ranging from RM2.28 to RM2.49.

Utusan added 16 sen or 14.68% to RM1.25, the highest since May, with 2.87 million shares done at between RM1.12 and RM1.26.

Citing executives close to the proposed merger, a foreign newspaper report on Nov 27 said the proposal had obtained the green light from Prime Minister Datuk Seri Abdullah Ahmad Badawi.

The report said editorially, the two entities would remain independent of each other and would maximise resources in non-editorial matters such as marketing, advertising and utilisation of printing plants, particularly NSTP’s Shah Alam plant.

A local research house said such a merger would mark the largest print media consolidation ever under the Malay print industry in Malaysia.

“Total industry advertising expenditure (adex) is in a slowdown now, which calls for consolidation to reap the benefits of economies of scale.

“We note that both companies are now making losses, which we believe, however, is not the main concern for this potential move. The deal could pull NSTP under direct UMNO control,” it said.

Other analysts said among the factors to determine the merger would be the advertising revenue.

“We have to look at the cashflow, which is the advertising revenue, and not only at NTA since they are not manufacturing plants,” said an analyst.

NSTP posted a net profit of RM6.4 million in the third quarter ended Sept 30, 2006. It has RM14.29 million cash.

Analysts said NSTP continued to face an uphill battle to arrest the decline in its English adex newspaper share, with a circulation of about 150,000 copies per day.

Consensus net loss was RM4.6 million for financial year (FY) ending Dec 31, 2006. However, NSTP was forecast to turn around in FY07 with a RM17.3 million net profit, following cost-cutting measures.

Utusan reported a net profit of RM2.37 million for the second quarter ended June 2006. It has RM42.15 million cash.

The Edge Daily, Malaysia, 27-11-2006

~ by anick on November 27, 2006.