Jurisdiction - Malaysia
Reports and Analysis
Malaysia – Spotlight On Investment.

3 May, 2013


Malaysian companies have been very active in M&A markets, securing a number of high value and high profile acquisitions in recent times.  Why is this, which sectors and where to next?


Malaysia's outbound investment is at an all-time high.  Last year saw record outbound investment by Malaysian companies across various sectors. Petronas' US$5.4 billion acquisition of Canadian gas exploration company, Progress Energy Resources was a high profile example in the energy sector.  Financial services companies were also very acquisitive, including the acquisition by CIMB group of RBS' cash equities and associated investment banking business in Southeast Asia, In the telecoms sector, Axiata's strategic merger of Hello Axiata and Latelz Company in Cambodia* saw Axiata emerge as one of the largest operators in Cambodia in terms of subscribers and revenue.


Activity shows no signs of slowing down.  Just last month, Sime Darby entered into a US$525 million joint venture with Ramsay Healthcare for the provision of healthcare services in South East Asia.  In March, a survey of foreign investment, published on the eve of the fifth BRICS summit, revealed that Malaysia is now the third biggest investor into Africa, behind France and the US, but ahead of China and India.


Such activity extends beyond outbound M&A: 2012 saw three initial public offerings of more than US$1 billion on Bursa Malaysia, as well as the issue of the world's largest sukuk bond, a RM 31 billion (approximately US$10 billion) issue by the Malaysian road toll operator, PLUS, and at least four further bond issuances totalling more than RM 1 billion.  Major inbound M&A transactions in 2012 included the acquisition of ING Management Holdings (Malaysia) Sdn Bhd by AIA Group Limited for US$1.73 billion and the acquisition of Carrefour Malaysia Sdn Bhd and Magnificient Diagraph Sdn Bhd by the Japanese based company, Aeon Co., Ltd.


What has spurred such economic activity?  Malaysia's recent economic growth has been the highest recorded in Asia, and it is one of only thirteen counties in the world to have recorded a 7% or more increase in gross national income for twenty-five years.  This has been fuelled by a burgeoning middle class and renewed confidence in Malaysia as an investment decision, due in large part to concentrated initiatives by the Malaysian government, such as the "Economic Transformation Program", to make Malaysia more attractive to foreign investors.  In various sub-sectors, the government raised the foreign investment ceiling from 49% to 70%, which has generated activity and led to further capital inflows to Malaysia.


Another differentiator may lie in the country's importance as an Islamic finance centre.  Malaysia dominates the global market for sukuk, or Islamic bonds, and just over a fifth of the country's banking system, by assets, is sharia-compliant.  The country issued the world's first sovereign sukuk in 2002, and in the first three quarters of 2012, it was responsible for almost three quarters of total global issuance.  Such figures are striking for a relatively small country of just 30 million people. The ability to raise large sums of money can give Malaysian companies a competitive edge in the M&A market: the Malaysian telecom group, Axiata, for example, recently established a USD1.5 billion multi-currency sukuk program, with the inaugural issuance under the program, a 2-year RMB1 billion sukuk, the largest RMB sukuk offering to date.  Such examples highlight Malaysia's advantage in combining its traditional heritage, outward-looking nature and its links with financial hubs such as London and Singapore.



For further information, please contact:
Veronica O’Shea, Herbert Smith Freehills
Nicola Yeomans, Herbert Smith Freehills


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