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Will Maxis go Private?

Billionaire T. Ananda Krishnan plans to buy full control of Maxis Communications Bhd, Malaysia’s biggest mobile-phone operator, which is valued at $9.6 billion.

Krishnan’s Usaha Tegas Sdn and affiliates plan to make an offer to buy all shares they don’t already own by May 3, Maxis said today in a statement to the stock exchange in Kuala Lumpur. The statement didn’t give a reason for Krishnan’s planned bid.

The purchase of an estimated 54 percent stake, valued at $5.1 billion at current prices, would be the biggest acquisition of phone assets in Malaysia. Krishnan would get full control of a company whose profits have surged 46 percent in two years, led by subscriber gains at home and overseas markets such as India.

“Maybe they saw the potential of Maxis, especially with India starting to contribute to their earnings,” said Ang Kok Heng, who manages $114 million, including Maxis shares, at Phillip Capital Management in Kuala Lumpur. “For long term investors, it’s going to be an opportunity lost because you have one less good company to invest in here.”

Shares of Kuala Lumpur-based Maxis, the best performer on the MSCI AC Asia Pacific Telecommunication Services Index, were halted from trading today and will resume trading on May 4. The stock has risen 27 percent this year.

`Studying Implications’

“The Board of Directors of the company is currently studying the implications of the potential takeover,” Maxis’s Chief Executive Officer Jamaludin Ibrahim said in a statement.

The potential takeover is not expected to have any impact on the day-to-day running of the company’s operations.”

Other phone company shares surged after the announcement. Digi.Com Bhd, the smallest Malaysian mobile-phone operator, jumped 5.7 percent to a record 20.4 ringgit at today’s close in Kuala Lumpur. Telekom Malaysia Bhd, the country’s biggest phone operator, gained 3.9 percent to 10.8 ringgit.

The two stocks are up because of the “scarcity premium,” said Ong Boon Leong, an analyst at DBS Vickers in Kuala Lumpur.

Krishnan, 68, owns Malaysian businesses including pay- television operator Astro All Asia Networks Plc and Tanjong Plc, a power and gaming group. His net worth is $6 billion, making him Malaysia’s second richest person after sugar baron Robert Kuok and the 17th wealthiest in Asia, according to Forbes Magazine. Astro shares jumped 5.2 percent to 5.05 ringgit today.

Second Richest Malaysian

The Harvard Business School graduate is seeking to expand his fleet of businesses at home and overseas. Usaha Tegas is completing talks to buy a stake in Sri Lanka Telecom Ltd, the island’s biggest fixed-line phone company. Maxis said on March 21 it may join Usaha Tegas in the purchase.

Maxis is also looking for a new partner in Indonesia after spending $123.9 million raising its stake in PT Natrindo Telepon Selular, the company’s local operation.

Maxis said this month it plans to spend $3 billion in the next five years expanding its network in India to counter slowing growth at home. The company’s Indian unit, Aircel Ltd, generated 13 percent of total fourth-quarter sales.

More than 70 percent of Malaysia’s 27 million people own mobile phones, compared with about 10 percent in India. Aircel said in February it expects to almost double its subscribers to 8 million this year in India.

Undervalued Company

The latest offer suggests Krishnan may be seeking to reorganize the company to raise the stock’s price, according to Jeffrey Tan, an analyst at OSK Research Sdn in Kuala Lumpur. Maxis shares trade at 4.7 times the company’s estimated book value, lower than an average of 5.8 times for phone companies in the Pacific Rim, according to data compiled by Bloomberg.

The offer “could also be a prelude to a lot of things,” said Tan, who rates Maxis shares as “neutral.” “The shareholder thinks the company is undervalued.”

Krishnan owns 46.5 percent of Maxis, according to data compiled by Bloomberg. Krishnan may spend 17.6 billion ringgit buying the remaining 53.5 percent based on current market price, according to Tan.

Usaha Tegas owns 21.8 percent of Maxis, according to Maxis’ Lim. Maxis couldn’t immediately say if the Usaha Tegas stake is part of Krishnan’s 46.5 percent stake.

Ralph Marshall
, executive director of Usaha Tegas, is traveling and couldn’t immediately be reached for comment, his assistant Gurdip Kaur said.-Soraya Permatasari ,Bloomberg

About Kugan

Kugan is the founder of MalaysianWireless. He has been observing the mobile industry since 2003. Connect with him on Twitter: @scamboy