Airasia-MAS merger: Predicted on Sahathevan Blog in 2008

This morning, 6 August 2011, the Malaysian Insider reported:

State-owned Malaysia Airlines (MAS) will swap shares with Asia’s largest budget carrier AirAsia this week in a deal that will see Tan Sri Tony Fernandes help stop the ailing flag carrier from plunging any further into red ink, said industry sources.

The Malaysian Insiderunderstands that the share swap that could see Fernandes getting a 20 per cent stake in the national carrier, will allow both Malaysian carriers to rationalise their fleet, frequencies and destinations within the country and abroad while ensuring MAS returns to becoming a premier airline.

“The deal is on and it should be signed Monday at the earliest,” a source told The Malaysian Insider.

AirAsia’s main shareholders Tune Air Sdn Bhd, owned by Fernandes (picture) and Datuk Kamarudin Meranun, is expected to benefit most from the share swap with MAS as it hold 26.28 per cent of the budget carrier as of July 6, 2011.
(http://www.themalaysianinsider.com/business/article/mas-airasia-in-share-swap-to-rescue-ailing-flag-carrier/)

In 2008,I wrote the following.While in that article I describe a transaction differently structured, the net effect remains the same: Choirboy and backers get MAS.

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Monday, October 06, 2008
Privatise AirAsia, take-over Malaysian Airlines; Another Avenue Assets-ECM Libra in the making?
http://sahathevan.blogspot.com/2008/10/privatise-airasia-take-over-malaysian.html

The following has been recently reported:

Southeast Asia's largest discount airline, rose for the first time in three days on the Kuala

Lumpur stock exchange after the Edge newspaper said the carrier's biggest shareholders

are considering a buyout.

(http://www.bloomberg.com/apps/news?pid=20601213&sid=a88FsGpZNzk8&refer=home)


AIRASIA Bhd's major shareholders may have to pay some RM1.25 billion to take the

budget carrier private, analysts say.
(http://www.btimes.com.my/Current_News/BTIMES/Monday/Frontpage/jasia05-2.xml/Article/index_html)


Readers are reminded that Fernandes and Co, AirAsia's major shareholders, are not what

one might consider cash-rich. Hence the question to ask here is how such a deal might be

made doable. One option, which this writer thinks is probable, might involve the following:

a) Tune Air ie Fernandes and Co borrow the required sum , say RM 1.25 billion as reported, and take AirAsia private, AirAsia stock serving as collateral for a bridging facility

b)The loans are then transferred to AirAsia, and/or charged against AirAsia's assets,instead of AirAsia stock

c)The entire company with its new borrowing is then injected into a listed company, freeing Tune Air of any debt obligation and instead providing it unencumbered , tradeable, liquid stock.


Readers get no prizes for guessing that the listed company is likely to be Malaysian Airlines

Bhd. Subsequently, Tune Air gets a substantial if not the majority stake in MAS and

probably the right to manage the merged AirAsia-MAS. After all, Tony and Co have proven that they have undoubted skills in airline management (see story below).

The above bears similarity to the Avenue Assets-ECM LIbra transaction (http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_2aa8cb03-cb73c03a-b113c700-cc9e648c).


Readers will recall that Tony & Co and Kalimullah Hassan and Lim Kian Onn of ECM Libra are now associated via AirAsia X and other ventures. (http://www.airasia.com/site/my/EN/pressRelease.jsp?id=17e1b7ba-ac1e00ae-39281400-a8ef3d01 & http://www.smidec.gov.my/pdf/3)AirAsia%20X.pdf)

posted by ganesh sahathevan @ 3:45 PM