KUALA LUMPUR: Sime Darby Bhd and UMW Holdings Bhd's share prices rose in the early session today on Sime Darby's proposed acquisition of a 61.2 per cent stake in UMW from Permodalan Nasional Bhd (PNB).

At 10.32 am, Sime Darby's shares advanced seven sen to RM2.18 per unit with 11.0 million shares changing hands, while UMW's jumped 17 sen to RM4.79 per unit with 11.15 million shares traded. On Thursday, Sime Darby entered into a conditional share purchase agreement (SPA) with PNB for a 61.2 per cent stake in UMW for RM3.57 billion in cash.

The deal is conditional on Sime Darby's shareholders' approval; consent from the respective brand principals, including UMW's brand principals; and consent of relevant governmental authorities in relation to the change of control of UMW. In a note, MIDF Research said it believes that the RM5 per share offer by Sime Darby was fair at a decent 9.0 per cent premium to its sum-of-parts (SOP)-derived fair value of RM4.60 per share.

"Broadly, we believe UMW has had a good run since the trough of the auto demand cycle back in 2020."This year, total industry volume is expected to hit another record high of 725,000 (MAA's forecast) for the second year running, mainly driven by Perodua.

"We see this buyout offer as good opportunity for UMW's minorities to exit at peak auto demand cycle," it said. Upon completion of the SPA, Sime Darby will be obligated to extend a mandatory general offer (MGO) at the same cash offer price of RM5 per share to UMW's minority shareholders and it intends to delist UMW thereafter.

Sime Darby expects the acquisition of PNB's stake in UMW to be completed by the fourth quarter of 2023 (4Q 2023) followed by completion of the MGO in 1Q 2024."Assuming the deal proceeds to an MGO, we recommend investors to take Sime Darby's buyout offer at RM5 per share," said MIDF Research.

 - BERNAMA