Tanjung planning to sell its gaming arm
Filed Under (Business News) by Webmaster on 13-09-2010
Tagged Under : Ananda Krishnan, Pan Malaysian, Tanjong Plc, Usaha Tegas
Usaha Tegas Sdn Bhd (UT) is finalising plans to sell the gaming business of Tanjong plc, post the latter’s privatisation, according to investment banking sources.
“It is only a question of time. UT is now busy finalising the funding of Tanjong’s privatisation. But once that is settled, gaming will be hived off as the focus is on the power business,” said one banker familiar with the plans.
To recap, in late July, a consortium comprising tycoon T. Ananda Krishnan’s private vehicle UT and unnamed parties acting in concert, which together own 47% of Tanjong, made an offer to buy out the firm at RM21.80 a share in cash. The takeover has yet to be concluded, with Tanjong recently extending the closing date for acceptances of the offer to Sept 27.
It is no secret that UT’s ultimate shareholder, Ananda, has little interest in pursuing the gaming business. “It is a philosophical decision. He just doesn’t like being in the gaming business,” said one source.
It has already been speculated that Ananda may consider selling off his gaming business and bringing back to the market his power assets in one form or another.
Part of the rationale for privatising Tanjong is that the group suffered from a conglomerate discount.
Tanjong’s gaming division consists of its numbers forecast totalisator (NFO) and racing totalisator (RTO) business.
Although the NFO business has proven healthy, Tanjong continues to see losses from its racing operations. According to a UOB Kay Hian report, the losses from the RTO business could reach up to RM80mil for the current financial year.
Tanjong’s gaming arm Pan Malaysian Pools Sdn Bhd reportedly has about 24% market share, the least of the country’s three players. Berjaya Sports Toto Bhd’s market share is about 40% while Magnum Corp Bhd’s is 36%.
Tanjong stood out as the player that had done the least among the three players to grow its gaming business in terms of new products and outlets, indicating Ananda’s lack of interest in the industry, analysts pointed out.
Analysts said that UT should be able to fetch around RM2.4bil for Tanjong’s gaming business, based on an assumption that the buyer was willing to pay around a 15 times multiple of the earnings of the business.
Meanwhile, it had been reported that around 70% of the acquisition price tag of RM4.7bil to privatise Tanjong would come from the debt market, with a ringgit financing been given priority over US dollar, although a portion of the deal was still expected to be funded offshore. Tanjong Capital, the unit of UT taking over Tanjong, is also expected to raise an additional US$500mil equivalent at the same time to fund expansion needs after taking the target company private.
Bankers also pointed out that after the hiving off of Tanjong’s gaming business, Ananda was likely to relist Powertek Bhd, the power business of the Tanjong group.
Powertek, a power generator with exposure to local and foreign markets, was listed on the local stock exchange in 1996, only to be taken private by Tanjong Energy Holdings Sdn Bhd in 2003.
However, contrary to speculation, Ananda was unlikely to list his oil and gas support services company, Bumi Armada Bhd, anytime soon, sources said.
Ananda had privatised Powertek and Bumi Armada in 2003, in deals worth a combined RM800mil.
