From Private to Public.. and now Private again...

About a month ago, we were acknowledged with the privatisation of the giant telecommunication company, MAXIS by decision of Tan Sri Ananda Krishnan of the shares not currently held by him. The privatisation exercise is expected to worth close to RM 39.47 billion (USD 11.54 billion) and it could be Malaysia's biggest corporate deal.

Binariang GSM, an investment holding firm and special purpose vehicle for Ananda's Usaha Tegas and affiliates, said through CIMB Investment bank it would offer RM 15.60 for the outstanding 2.53 billion shares in the company that Ananda does not already own.

Yesterday, June 21st 2007, AMMB Holdings Bhd's proposal to take AmInvestment Group Bhd (AIGB) private at RM3.70 per AIGB share via a one-for-eight rights issue at RM3.40 and borrowings of RM1.42 billion has been welcomed by Aseambankers.

It said the deal was good for both parties as AIGB would be offered a higher valuation, while for AMMB, the privatisation would give it a stronger earnings base. The privatisation would enable AMMB's shareholders to ride on a stronger earnings base as leakages to minorities at the AIGB level would be plugged.

Aseambankers also said the privatisation of AIGB would facilitate the AMMB groups' migration to a universal banking platform by leveraging on common infrastructure between AIGB and Ambank, the commercial banking arm of the AMMB group. Aseambankers believes the entire exercise is expected to be completed by the first quarter of 2008.

The question is, how would these privatisation exercises have an impact on the total market capitalisation of our share market? With these two big companies withdrawing their presence in the local bourse, would it be possible for Malaysian Capital Market to continue trade actively?

What could be the reasons for these privatisations? Are the companies having too much money but little attractive projects so that this is the only way to provide return to the existing shareholders? Or, is it not that the parent company/major shareholder trying to reap all the profits while the prospect of the company is seen to be profitable in the near future? Are there any indicators that could explain this development?

Perhaps, future research should be directed towards this scenario by looking at possible reasons and explanations of the current trend.