m&a - drbhicom

MERGERS & ACQUISITIONS:

A Case Study

Phase 1Phase 1(1990-1997)(1990-1997)

:: The Yahya EmpireThe Yahya Empire

Phase 2Phase 2(1997-2000)(1997-2000)

:: The Financial CrisisThe Financial Crisis

Phase 3Phase 3(2000-2004)(2000-2004)

:: The Financial RestructuringThe Financial Restructuring

Phase 4Phase 4(2004-2006)(2004-2006)

:: The New DRB-HICOMThe New DRB-HICOM

Phase 5Phase 5(2006 - current)(2006 - current)

:: The New ShareholdersThe New Shareholders

PHASE 1:

The Yahya Empire(1990-1997)

MCM

Master-Carriage Malaysia Sdn Bhd

1990 -1994

Tan Sri Yahya Ahmad Tan Sri Salleh Sulong Othman Jaafar

MCM

ACM Directional ASM

Master-Builders Ramgate

USF

1990 -1994

Isuzu Mitsubishi Citroen

100%100%

100%

100% 100%

100%

Imatex BhdProperty

Development

1994

Diversified Resources Berhad

“DRB”

ACM

injected

M&A: DRB-HICOM

DRB

ACM Intrakota

USPD

Modenas

Deftech

Imatex

1994 -1996

Automotive Property Dev Services

MTB

Puspakom

Gadek

GadekPlantation

- Listed on LSEX

1994 - 1996

USF

DRB acquired USF from MCM and later injected into Gadek as the purchase consideration for 33% shareholdings

Sea Insurance

Perspec

Financial Services

Construction

ACQUISITION OF GADEK

DRB

ACM Intrakota

USPD

Modenas

Deftech

Imatex

1994 -1996


MTB

Puspakom

Gadek

33%

Perspec

Sea Insurance

USF

Gadek Capital

M&A: DRB-HICOM

Gadek

1994 - 1996

• CCM was acquired from Standard Chartered Australia.

• Gadek Capital was created as the Holding Co of CCM.

• Later, Gadek Capital was listed on KLSE.

CCM

Gadek Capital

Financial Services

Holding Co.

ACQUISITION OF CCM

DRB

ACM Intrakota

USPD

Modenas

Deftech

Imatex

1994 -1996


MTB

Puspakom

Gadek 33%

Perspec

Sea Insurance

USF

Gadek Capital

CCM

55%HICOM

HICOM

Proton Alam Flora

EON

H. Teck See

H. Engineering

Comtrac

1994 -1996


HICOM-denzo

Air AsiaHICOM Gamuda

HICOM Properties KLAS

27%

29%

HICOM

1994 - 1996

USF & ACM

ACQUISITION OF HICOM From Khazanah

1.1. Part shares & part cashPart shares & part cash

2.2. USF & ACM were injected into HICOM. Both USF & ACM were injected into HICOM. Both valued at RM400.0mvalued at RM400.0m

3.3. Gadek issued RM760m guaranteed bonds to Gadek issued RM760m guaranteed bonds to pay Khazanah .pay Khazanah .

1994 - 1996

The Success Factors

1.1. Tan Sri Yahya AhmadTan Sri Yahya Ahmad

Brilliant Brilliant

Risk takerRisk taker

Tun Mahathir’s corporate manTun Mahathir’s corporate man

Annuar’s close friendAnnuar’s close friend

2.2. Malaysia – Industrialisation eraMalaysia – Industrialisation era

Automotive sector is one of the catalystAutomotive sector is one of the catalyst

3.3. Strong support by BanksStrong support by Banks

Banks are knocking at doorBanks are knocking at door

March 1997

The tragic death of

Tan Sri Yahya Ahmad

PHASE 2:

The Financial Crisis(1997-2000)

DRB

ACM

IntrakotaUSPD

Modenas

Deftech

Imatex

1996 – Yahya Empire


MTB

Puspakom

Gadek

33%

Perspec Sea Insurance

USF

Gadek Capital

CCM

55%

HICOM

Proton

EON

HICOM Prop

HICOM Gamuda

Comtrac

KLAS

Alam Flora

Air Asia

30%

29%

27%

MCM

1996

Average Share Prices

1.1. DRBDRB : : RM5.00RM5.00

2.2. GadekGadek : : RM15.00RM15.00

3.3. Gadek CapGadek Cap : : RM8.00RM8.00

4.4. HICOMHICOM : : RM8.00RM8.00

5.5. ProtonProton : : RM10.00RM10.00

6.6. EONEON : : RM10.00RM10.00

PHASE 3:

Financial Restructuring

DRB

ACM

IntrakotaUSPD

Modenas

Deftech

Double Track

DRB-HICOM Group


MTB

Puspakom

Gadek

33%


USF

Gadek Capital

CCM

55%

HICOM

Proton

EON

HICOM Prop

HICOM Gamuda

Comtrac

KLAS

Alam Flora

Air Asia

30%

29%

27%

MCM

Imatex

M&A: DRB-HICOM1997 - 2000

What were the problems?

1.1. Very high debtsVery high debts

- Gearing reached 2.5 times at each level- Gearing reached 2.5 times at each level

2.2. Interest rate shot up to 22% (from 8%)Interest rate shot up to 22% (from 8%)

3.3. Cash trapped; dividend insufficientCash trapped; dividend insufficient

4.4. Security value underwater – share price droppedSecurity value underwater – share price dropped

5.5. Banks recall the facilitiesBanks recall the facilities

6.6. Cross defaultCross default

7.7. Long term investments were funded by short term Long term investments were funded by short term loans (Mismatched) loans (Mismatched)

1997 - 2000

The Borrowings (principal amount)

CompaniesCompanies RM’mRM’m TypeType PurposePurpose

1.1. DRBDRB 400.0400.0

200.0200.0

RC / TLRC / TL

TLTL

To finance Intrakota and its To finance Intrakota and its related companies/businessrelated companies/business

To finance the setting up USPDTo finance the setting up USPD

2.2. IntrakotaIntrakota 450.0450.0 HPHP To finance the busesTo finance the buses

3.3. Gadek Gadek 760.0760.0

260.0260.0

BondsBonds

RCRC

To finance acquisition of HICOMTo finance acquisition of HICOM

To finance acquisition of SEA InsTo finance acquisition of SEA Ins

4.4. Gadek CapitalGadek Capital 200.0200.0 RCRC To finance acquisition of CCMTo finance acquisition of CCM

5.5. HICOMHICOM 950.0950.0

200.0200.0

BondsBonds

RC/ODRC/OD

To finance acquisition of ProtonTo finance acquisition of Proton

Working capitalWorking capital

6.6. Others*Others* 3,000.03,000.0 RC/TLRC/TL Working capitalWorking capital

TotalTotal 6,420.06,420.0

* At subsidiaries

PHASE 3:

Financial Restructuring

• Merger

• Debt restructuring

The Merger

2000

The Merger

1.1. Consolidation of MCM and the 4 listed companies:Consolidation of MCM and the 4 listed companies:

DRBDRB

GadekGadek

Gadek CapitalGadek Capital

HICOMHICOM

2.2. Rationalisation and streamlining of businessesRationalisation and streamlining of businesses

Disposals of assetsDisposals of assets

DRB

Gadek Cap

Gadek

The Merger

MCM

HICOM

33%

Offer to exchange shares – 70%

55%30%



Acquire via issuance of shares

Merger – The Main Proposals

1.1. Proposed Gadek OffersProposed Gadek Offers

Voluntary conditional offer for the remaining securities in Gadek not already Voluntary conditional offer for the remaining securities in Gadek not already owned by DRB.owned by DRB.

2.2. Proposed HICOM OffersProposed HICOM Offers

Voluntary conditional offer for the remaining securities in HICOM not Voluntary conditional offer for the remaining securities in HICOM not already owned by DRB.already owned by DRB.

3.3. Proposed Gadek Capital OffersProposed Gadek Capital Offers

Voluntary conditional offer for the remaining securities in Gadek Capital not Voluntary conditional offer for the remaining securities in Gadek Capital not already owned by DRB.already owned by DRB.

4.4. Proposed Acquisition of MCMProposed Acquisition of MCM

Acquisition of 100% equity interest in MCM via issuance of shares by DRB.Acquisition of 100% equity interest in MCM via issuance of shares by DRB.

Take-over Method to acquire the shares

The Merger

The exchange ratios

CompaniesCompanies Ratio for SharesRatio for Shares

1.1. GadekGadek 1.0 : 1.01.0 : 1.0

2.2. Gadek CapitalGadek Capital 0.5 : 1.00.5 : 1.0

3.3. HICOMHICOM 0.7 : 1.00.7 : 1.0

Based on DRB share price of RM4.57 against 5-day weighted average share prices of the companies:

CompaniesCompanies RMRM

1.1. GadekGadek 4.524.52

2.2. Gadek CapitalGadek Capital 2.322.32

3.3. HICOMHICOM 3.253.25

Basically Transform

From

DRB

ACM

IntrakotaUSPD

Modenas

Deftech

Imatex

DRB-HICOM Group


MTB

Puspakom

Gadek

33%


USF

Gadek Capital

CCM

55%

HICOM

Proton

EON

HICOM Prop

HICOM Gamuda

Comtrac

KLAS

Alam Flora

Air Asia

30%

32%

27%

MCM

Double Track

DRB-HICOM

ACM

IntrakotaModenas

Deftech Imatex

The Merger


MTB

Puspakom


USF

EON

HICOM Prop

HICOM Gamuda

Comtrac

KLAS

Alam Flora

Air Asia

Double Track

Proton City

Horsedale Dev

Hicom Suzuki

Hicom Yamaha

OSI

Kenyir Splendur

Rebak Marina

Scott & English

HICOM IT

Merger – Concurrent Proposals

1.1. Gadek Warrants Exchange SchemeGadek Warrants Exchange Scheme

2.2. HICOM Warrants Exchange SchemeHICOM Warrants Exchange Scheme

3.3. DRB Warrants Rights IssueDRB Warrants Rights Issue

4.4. DRB ESOSDRB ESOS

5.5. Cancellation of HICOM ESOSCancellation of HICOM ESOS

6.6. M&A amendmentsM&A amendments

7.7. Increase in authorised share capitalIncrease in authorised share capital

8.8. Change of nameChange of name

9.9. Disposal of Proton & USPD (Strategic Exit)Disposal of Proton & USPD (Strategic Exit)

Rationale of The Merger

1.1. Reduce complexity of the Group structure.Reduce complexity of the Group structure.

2.2. Streamline assets portfolio of each listed companies.Streamline assets portfolio of each listed companies.

3.3. Generate opportunity to create a balance portfolio in 3 Generate opportunity to create a balance portfolio in 3 business segments.business segments.

4.4. Transformation of assets to take advantage of “new Transformation of assets to take advantage of “new economy”.economy”.

5.5. Consolidate various treasuries to realise more resilient Consolidate various treasuries to realise more resilient financial structure of the DRB-HICOM Group.financial structure of the DRB-HICOM Group.

Benefits of the Merger:

1.1. Synergistic benefitsSynergistic benefits

2.2. Resilient against economic uncertaintyResilient against economic uncertainty

3.3. Enhance to value: restructuring assets & liabilities (right Enhance to value: restructuring assets & liabilities (right balancebalance

4.4. Transparency: transparent organization structureTransparency: transparent organization structure

Rationalisation of Businesses

Disposal of Assets – to reduce debt

1.1. Proton was sold to Petronas (part of Merger exercise).Proton was sold to Petronas (part of Merger exercise).

Proceeds: RM1.0b @ RM7/share– redeem HICOM bonds and Proceeds: RM1.0b @ RM7/share– redeem HICOM bonds and repay other debtsrepay other debts

2.2. USPD was sold to Proton (part of Merger exercise).USPD was sold to Proton (part of Merger exercise).

Proceeds: RM275.0m @ RM27/share – repay Proceeds: RM275.0m @ RM27/share – repay debts at DRBdebts at DRB

3.3. CCM was sold to Hong Leong Bank.CCM was sold to Hong Leong Bank.

Proceeds: RM470m – repay debts at Gadek Capital.Proceeds: RM470m – repay debts at Gadek Capital.

4.4. Various companies in HICOM: Kedah Cement, etcVarious companies in HICOM: Kedah Cement, etc

Proceeds: RM600m – repay debts at HICOMProceeds: RM600m – repay debts at HICOM

Financials: As Is vs The Merger

----------AS IS--------------------AS IS---------- -----THE MERGER--------THE MERGER---

RM’mRM’m 20012001 20022002 20032003 20012001 20022002 20032003

TurnoverTurnover 4,319.64,319.6 2,524.62,524.6 2,560.82,560.8 9,595.89,595.8 6,587.96,587.9 8,145.98,145.9

Operating ProfitOperating Profit 121.8121.8 75.675.6 130.7130.7 332.1332.1 422.4422.4 553.9553.9

EIEI 133.0133.0 -- -- 18.218.2 -- --

PBTPBT 254.8254.8 75.675.6 130.7130.7 350.3350.3 422.4422.4 553.9553.9

TaxationTaxation (68.0)(68.0) (36.2)(36.2) (43.5)(43.5) (152.7)(152.7) (165.6)(165.6) (185.0)(185.0)

PATPAT 186.8186.8 39.439.4 87.287.2 197.5197.5 256.8256.8 368.9368.9

MIMI (19.4)(19.4) (12.7)(12.7) (27.8)(27.8) (47.1)(47.1) (71.7)(71.7) (99.9)(99.9)

PATMIPATMI 167.4167.4 26.726.7 59.459.4 150.4150.4 185.1185.1 269.0269.0

No. of shares (‘m)No. of shares (‘m) 263.0263.0 263.0263.0 263.0263.0 928.7928.7 928.7928.7 928.7928.7

EPS (sen)EPS (sen) 0.640.64 0.100.10 0.220.22 0.160.16 0.200.20 0.290.29

The Merger - Process

Proposalor

Scheme

Financial analysis / Valuation– various optionsFinancial analysis / Valuation– various options

Financial impact - ShareholdersFinancial impact - Shareholders

Business strategies / directionBusiness strategies / direction

FinancialAdvisors

Merchant Bankers, solicitors, accountants (auditors)Merchant Bankers, solicitors, accountants (auditors)

All angle – legal, accounting treatment etc; All angle – legal, accounting treatment etc; enhanced / improved proposal or schemeenhanced / improved proposal or scheme

Timelines / deadlinesTimelines / deadlines

Submission to authorities – SC, FIC, KLSE, BNMSubmission to authorities – SC, FIC, KLSE, BNM

Managementand

Board Approvals

Management approvalManagement approval

Board meeting - All advisors are invitedBoard meeting - All advisors are invited

Letters to Board of Directors – HICOM, Gadek & Letters to Board of Directors – HICOM, Gadek & Gadek CapitalGadek Capital

The Merger – Process (cont’d)

Announcement To KLSETo KLSE

Press releasePress release

CircularTo

Shareholders

At all respective companies – HICOM, Gadek and At all respective companies – HICOM, Gadek and Gadek CapitalGadek Capital

Due diligence on circularDue diligence on circular

Content includes financial impact, shareholdings etcContent includes financial impact, shareholdings etc

RoadShow

Other major shareholdersOther major shareholders

Fund ManagersFund Managers

MediaMedia

Announcement to KLSE

1.1. Only for listed companies.Only for listed companies.

2.2. Assisted by Merchant Bankers / SolicitorsAssisted by Merchant Bankers / Solicitors

3.3. BursaMalaysia guidelinesBursaMalaysia guidelines Chapter 10 - TransactionsChapter 10 - Transactions

Percentage RatiosPercentage Ratios

4.4. When to announce?When to announce? Chapter 9 – Continuing Disclosure: Part CChapter 9 – Continuing Disclosure: Part C

5.5. Suspense of the counter?Suspense of the counter? Practice Note No. 2/2001Practice Note No. 2/2001

6.6. Leaking of information before announcement?Leaking of information before announcement? Chapter 9 – Part EChapter 9 – Part E

5% and more5% and more : Announcement to Bursa Malaysia: Announcement to Bursa Malaysia

15% and more15% and more : Circular to shareholders: Circular to shareholders

25% and more25% and more : Shareholders’ approval: Shareholders’ approval

Due Diligence Exercise

1.1. Under Sec 212 of CMSA (Capital Market & Securities Under Sec 212 of CMSA (Capital Market & Securities Act). Previously Sec 32B of SC Act.Act). Previously Sec 32B of SC Act.

2.2. Sec 214 of CMSA – Fine up to RM3.0m or imprisonment Sec 214 of CMSA – Fine up to RM3.0m or imprisonment of not more than 3 years or bothof not more than 3 years or both

3.3. Formation of DDWGFormation of DDWG

Director of Co. (chairman)Director of Co. (chairman)

Employees – HODs / HOSEmployees – HODs / HOS

SolicitorsSolicitors

Advisors – Merchant Bankers, Reporting AccountantsAdvisors – Merchant Bankers, Reporting Accountants

4.4. Due Diligence Planning MemorandumDue Diligence Planning Memorandum

5.5. DDWG will make recommendations to the Board for DDWG will make recommendations to the Board for circular to be approved.circular to be approved.

6.6. The Board is responsible on information in the circularThe Board is responsible on information in the circular

Due Diligence Exercise

1.1. Solicitors:Solicitors:

ROC on corporate informationROC on corporate information

Contracts / agreements / licenses etcContracts / agreements / licenses etc

Confirmation from other solicitorsConfirmation from other solicitors

2.2. Reporting Accountants:Reporting Accountants:

Financial projections, assumptionsFinancial projections, assumptions

3.3. Management:Management:

Confirmation on statements madeConfirmation on statements made

Confirmation from subsidiariesConfirmation from subsidiaries

4.4. Establishment on cut-off-date, materiality threshold Establishment on cut-off-date, materiality threshold

• All information in circular must be verified / confirmed

The Merger – Process (cont’d)

Approvals

Shareholders at EGMShareholders at EGM

Authorities – SC, KLSE, FIC & BNMAuthorities – SC, KLSE, FIC & BNM

Announcement to KLSEAnnouncement to KLSE

Acceptance /Completion

Announcement to KLSE on level of acceptancesAnnouncement to KLSE on level of acceptances

Completion in November 2000Completion in November 2000

InternalImprovement

Reshuffling of employees – No VSS or retrenchmentReshuffling of employees – No VSS or retrenchment

Improvement of staff benefits (to ex DRB)Improvement of staff benefits (to ex DRB)

Re-branding – new corporate logo, Vision & MissionRe-branding – new corporate logo, Vision & Mission

The Merger

The Success Factors (completed as scheduled)1.1. Management control Management control

All 4 listed companies are controlled by same managementAll 4 listed companies are controlled by same management

2.2. Same shareholdersSame shareholders

Institutional shareholders / Government related companies Institutional shareholders / Government related companies – EPF, PNB, Khazanah, Pension Funds– EPF, PNB, Khazanah, Pension Funds

4.4. Minority shareholders do not wish to hold unlisted shares.Minority shareholders do not wish to hold unlisted shares.

Gadek, Gadek Capital & HICOM will be delisted from KLSE.Gadek, Gadek Capital & HICOM will be delisted from KLSE.

3.3. Similar Businesses Similar Businesses

HICOM subsidiaries = DRB subsidiariesHICOM subsidiaries = DRB subsidiaries

5.5. Perfect Timing.Perfect Timing.

Recession, share prices droppedRecession, share prices dropped

Debt Restructuring

Debt Outstanding –After Merger

CompaniesCompanies RM’mRM’m TypeType StatusStatus

1.1. DRBDRB 400.0400.0

200.0200.0

RC / ODRC / OD

TLTL

OutstandingOutstanding

PaidPaid

2.2. IntrakotaIntrakota 450.0450.0 HPHP OutstandingOutstanding

3.3. Gadek Gadek 760.0760.0

260.0260.0

BondsBonds

RCRC



4.4. Gadek CapitalGadek Capital 200.0200.0 RCRC PaidPaid

5.5. HICOMHICOM 950.0950.0

200.0200.0

BondsBonds

RC/ODRC/OD

PaidPaid

PaidPaid

6.6. Others*Others* 3,000.03,000.0 RC/TLRC/TL Partially paid.Partially paid.

TotalTotal 6,420.06,420.0

* At subsidiaries

3,100.0

Gadek Debts

DebtDebt PrincipalPrincipalRM’mRM’m

InterestInterest

RM’mRM’m

TypeType SecuritySecurity

1.1. Gadek BondsGadek Bonds

(guaranteed)(guaranteed)

740.0740.0 30.030.0 Fully Fully securedsecured

30% of HICOM shares 30% of HICOM shares held by Gadekheld by Gadek

2.2. Syndication Syndication Term loanTerm loan

230.0230.0 70.070.0 Partially Partially securedsecured

Sea Insurance shares & Sea Insurance shares & certain land bankscertain land banks

3.3. RC / ODRC / OD 30.030.0 12.012.0 UnsecuredUnsecured --

TotalTotal 1,000.01,000.0 112.0112.0

Total Lenders = 18

Interest rates: 9% - 12%

Gadek DebtsList of Lenders

1. 1. CIMBCIMB 10.10. HSBCHSBC

2.2. BCBBCB 11.11. Sabah Dev BankSabah Dev Bank

3.3. Public BankPublic Bank 12.12. Utama MerchantUtama Merchant

4.4. OCBCOCBC 13.13. Affin BankAffin Bank

5.5. Maybank Int. (L)Maybank Int. (L) 14.14. Danaharta ManagersDanaharta Managers

6.6. The Sanwa BankThe Sanwa Bank 15.15. Bank RakyatBank Rakyat

7.7. Bayerische Bayerische Landesbank (L)Landesbank (L)

16.16. MaybankMaybank

8.8. RHBRHB 17.17. Alliance BankAlliance Bank

9.9. Bank UtamaBank Utama 18.18. Pengurusan Pengurusan DanahartaDanaharta

DRB-HICOM

Gadek Cap

Gadek

DRB-HICOM Group

HICOM

100%

55%30%70% 45%

EON

32%

Gadek Debt Restructuring

Options?

1.1. Further disposal of other assets in the Group?Further disposal of other assets in the Group?

2.2. Refinancing?Refinancing?

Issue another bonds?Issue another bonds?

Secure another syndication loan?Secure another syndication loan?

3.3. Section 176 – Scheme of Arrangement?Section 176 – Scheme of Arrangement?

4.4. Capital call from DRB-HICOM shareholders?Capital call from DRB-HICOM shareholders?


Factors to consider

1.1. Financial ProjectionsFinancial Projections

Interest paymentInterest payment

Principal paymentPrincipal payment

2.2. Business directions (affect payment of principal)Business directions (affect payment of principal)

3.3. Security arrangementSecurity arrangement

Assets for future developmentAssets for future development

4.4. Put your self in Lender’s shoesPut your self in Lender’s shoes

Understand lenders’ behavior / demandUnderstand lenders’ behavior / demand

RM1.1b


Balance RM872mConverted:

Cash paymentRM240m

The Scheme

Proceeds from sale of Gadek Capital to Malton - RM210m.

Internal funds – RM30m

RSLS A, B & C

RESLS A, B & C

REULS

Exchange price = RM1.88

YTM = 7%

Interest waiver (from 15 Dec 2001 to Conversion Date)Interest waiver (from 15 Dec 2001 to Conversion Date)

Security arrangementSecurity arrangement


RM’mRM’m Fully Fully SecuredSecured

Partially Partially SecuredSecured UnsecuredUnsecured TotalTotal

TotalTotal 770770 300300 4242 1,112.1,112.

Cash PaymentCash Payment (116)(116) (123)(123) (1)(1) (240)(240)

Conversion:Conversion:

- RSLS A- RSLS A 457457 -- -- 457457

- RSLS B- RSLS B -- 1010 -- 1010

- RSLS C- RSLS C -- 1818 -- 1818

457457 2828 -- 485485

- RESLS A- RESLS A 196196 -- -- 196196

- RESLS B- RESLS B -- 44 -- 44

- RESLS C- RESLS C -- 88 -- 88

196196 1212 -- 208208

- REULS - REULS -- 136136 4242 178178

Total ConversionTotal Conversion 653653 176176 4343 872872


AA BB CC

1.1. RSLSRSLS Charge over Charge over HICOM shares HICOM shares (30%) – 330m (30%) – 330m shares.shares.

Deed of Deed of assignment of assignment of EON shares EON shares (30%)(30%)

Lien holder’s Lien holder’s caveat of caveat of Gadek lands.Gadek lands.

Deed of Deed of assignment.assignment.

Deposit of Deposit of 21.5m shares of 21.5m shares of Sea Insurance.Sea Insurance.

Deed of Deed of assignment. assignment.

Put Option by DRB-HICOM on 3Put Option by DRB-HICOM on 3rdrd anniversary anniversary

2.2. RESLSRESLS 22ndnd legal charge legal charge of HICOM sharesof HICOM shares

Deed of Deed of assignmentassignment

Lien holder’s Lien holder’s caveat of caveat of Gadek lands.Gadek lands.

Deed of Deed of assignment.assignment.

Deposit of Deposit of 21.5m shares of 21.5m shares of Sea Insurance.Sea Insurance.

Deed of Deed of assignment. assignment.

3.3. REULSREULS -- -- --

Gadek Debt Restructuring - Process

Proposalor

Scheme

Cash flow projectionsCash flow projections

Repayment of interest and principalRepayment of interest and principal

Financial impact - ShareholdersFinancial impact - Shareholders

FinancialAdvisors

Appointment of financial advisors & solicitorsAppointment of financial advisors & solicitors

enhanced / improved proposal or schemeenhanced / improved proposal or scheme

Lend credibilityLend credibility

Drafting Debt Restructuring AgreementDrafting Debt Restructuring Agreement

NegotiationsWith lenders

Under purview of CDRCUnder purview of CDRC

Creditors meetingsCreditors meetings

Revised schemeRevised scheme

Management/Board

Management not agreeable – back to lenders / Management not agreeable – back to lenders / CDRCCDRC

Merchant Bank Appointment of Merchant BankAppointment of Merchant Bank

Submission to SC, KLSE, FIC & BNMSubmission to SC, KLSE, FIC & BNM

Announcement Only when Lenders signed Debt Restructuring Only when Lenders signed Debt Restructuring

AgreementAgreement

DRA

Gadek Debt Restructuring – Process (cont’d)

Terms & ConditionsTerms & Conditions

Authorities’Approvals

SC, KLSE, FIC & BNMSC, KLSE, FIC & BNM

Legal documents

Payment to the lendersPayment to the lenders

Conversion of debt into loan stocksConversion of debt into loan stocks

Gadek Debt Restructuring – Process (cont’d)

Shareholders Approval in the EGMApproval in the EGM

Payment

Signed various legal documents with the lendersSigned various legal documents with the lenders

RM800m

Intrakota Debt Restructuring

ETB*RM350m

IntrakotaRM450m

The Scheme – Sec 176

Creditors Creditors MeetingsMeetings

Liquidation basis

Sold all assets to SPNB**

Distribute proceeds to all Lenders & Creditors

Balance – termed out

Rapid KL

**subsidiary of Directionalsubsidiary of Directional

** wholly owned by MOF** wholly owned by MOF

PHASE 4:

The New DRB-HICOM(2004-2006)

Financials: Actual vs The Merger

---------ACTUAL-------------------ACTUAL---------- -----THE MERGER--------THE MERGER---

RM’mRM’m 20012001 20022002 20032003 20012001 20022002 20032003

TurnoverTurnover 4,968.64,968.6 4,329.24,329.2 4,898.04,898.0 9,595.89,595.8 6,587.96,587.9 8,145.98,145.9

PBTPBT 411.5411.5 391.1391.1 457.8457.8 350.3350.3 422.4422.4 553.9553.9

TaxationTaxation (175.8)(175.8) (163.4)(163.4) (194.3)(194.3) (152.7)(152.7) (165.6)(165.6) (185.0)(185.0)

PATPAT 235.7235.7 227.7227.7 263.5263.5 197.5197.5 256.8256.8 368.9368.9

MIMI (79.6)(79.6) (51.6)(51.6) (57.2)(57.2) (47.1)(47.1) (71.7)(71.7) (99.9)(99.9)

PATMIPATMI 156.1156.1 176.1176.1 206.3206.3 150.4150.4 185.1185.1 269.0269.0

No. of shares (‘m)No. of shares (‘m) 914.7914.7 926.8926.8 982.3982.3 928.7928.7 928.7928.7 928.7928.7

EPS (sen)EPS (sen) 2121 1919 2121 1616 2020 2929

Business Development 2000 - 2006

1.1. Ipoh –Rawang Double Tracking projects – RM2.5bIpoh –Rawang Double Tracking projects – RM2.5b

2.2. JV between DRB-HICOM, Oriental Hldgs & Honda Japan JV between DRB-HICOM, Oriental Hldgs & Honda Japan – sole distributor and manufacturer of Honda cars– sole distributor and manufacturer of Honda cars

3.3. HICOMOBIL – Sole distributor of Chevy carsHICOMOBIL – Sole distributor of Chevy cars

4.4. HICOM Suzuki – Sole distributor of Suzuki carsHICOM Suzuki – Sole distributor of Suzuki cars

5.5. Assembly of Mercedes Benz at MTB plant.Assembly of Mercedes Benz at MTB plant.

Corporate Exercises

1.1. Rationalisation of Insurance Business – Uni.Asia:Rationalisation of Insurance Business – Uni.Asia: JV between Sea Insurance & UOBJV between Sea Insurance & UOB

Acquisition of EON-CMG Life Insurance by Uni.AsiaAcquisition of EON-CMG Life Insurance by Uni.Asia

Cross sellingCross selling

2.2. Capital distribution by EON:Capital distribution by EON: Dividend in specie of Cycle Carriage Ltd sharesDividend in specie of Cycle Carriage Ltd shares

ECB sharesECB shares

HICOM swap CCL shares with ECB shares owned by JardineHICOM swap CCL shares with ECB shares owned by Jardine

3.3. Acquisition of Directional Group (Directional & ETB)Acquisition of Directional Group (Directional & ETB)

4.4. Refinancing of Gadek loans – DRB-HICOM issue bonds Refinancing of Gadek loans – DRB-HICOM issue bonds amounting to RM1.0bamounting to RM1.0b

5.5. Disposal of 15% shareholdings of the Estate of the late Tan Sri Disposal of 15% shareholdings of the Estate of the late Tan Sri Yahya to Tan Sri Syed Mokhtar for RM560m or RM3.65/shareYahya to Tan Sri Syed Mokhtar for RM560m or RM3.65/share

Share Performance: 1998 - 2006

1

2

34

5

M&A: DRB-HICOMWhy share price underperformed?

1.1. Diversified not focused.Diversified not focused.

2.2. Holding company discount. EON is preferred.Holding company discount. EON is preferred.

3.3. Automotive – fragmented industry, National Automotive Automotive – fragmented industry, National Automotive Policy not successful.Policy not successful.

4.4. Management not aggressive? Slow decision?Management not aggressive? Slow decision?

5.5. Relationship with Government:Relationship with Government:

Intrakota – returned to the GovernmentIntrakota – returned to the Government

Double tracking project – failedDouble tracking project – failed

Proton – returned to the GovernmentProton – returned to the Government

PHASE 5:

The New Shareholders(2006-present)

Current Development

1.1. Acquisition of Rangkai Positif Sdn BhdAcquisition of Rangkai Positif Sdn Bhd Issuance of DRB-HICOM shares: 376.9m @ RM1.95/shareIssuance of DRB-HICOM shares: 376.9m @ RM1.95/share

2.2. Privatisation of EONPrivatisation of EON Acquisition of the remaining shares: Cash RM370m @ RM2.10 /shareAcquisition of the remaining shares: Cash RM370m @ RM2.10 /share

3.3. Disposal of ECB sharesDisposal of ECB shares Cash RM1.3b @ RM9.55/share – pay debts, funding for EON Cash RM1.3b @ RM9.55/share – pay debts, funding for EON

privatisation & working capitalprivatisation & working capital

4.4. Acquisition of Bank MuamalatAcquisition of Bank Muamalat Issuance of DRB-HICOM shares: 548.6m @ RM1.91/shareIssuance of DRB-HICOM shares: 548.6m @ RM1.91/share

Tan Sri Syed Mokhtar shareholdings will be increased from 15% to 54%.

Share Performance: 2006 - Present

Thank You

m&a - drbhicom

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