To make simple what is a convoluted process, it should be explained that Krishnan is seeking a backdoor listing for his satellite business and is using listed Malaysian Tobacco as the chosen vehicle.
Malaysian Tobacco has faced the threat of delisting ever since it sold its tobacco business to BAT. The Kuala Lumpur Stock Exchange told the company it had to buy a cash-generating asset or else be delisted. At present, Malaysian Tobacco is a listed shell company sitting on M$758 million of cash.
There was a fear that this cash-rich entity was going to be used to bail out one of the so-called Malaysian crony capitalists (all of whom need cash to pay off debt). The fact that Krishnan will take control of the company and a good asset be bought, is a source of optimism for those wondering about the future direction of Malaysia.
Krishnan is widely regarded – in spite of his close connections to Mahathir – as an able businessman who has run his businesses well and is now expanding in a coherent way.
Here’s what will happen. Krishnan will buy 54.7% of Malaysian Tobacco from BAT for M$430 million and make a general offer to the other minorities. He will then use Malaysian Tobacco to buy his satellite company, Binariang Satellite Systems which owns two satellites with a pan-Asian footprint.
It was earlier reckoned that Malaysian Tobacco would buy Binariang for M$1.25 billion, but FinanceAsia has learned that the price will now be M$1.45 billion – because a M$203 million loan from another Krishnan company (Measat) will be converted into Binariang shares.
Analysts reckon the price is broadly fair, if benchmarked against its nearest comparable, probably Shin Satellite of Thailand, and the price per satellite is around half the global average which is $323 million (per satellite).
With a listed vehicle, Krishnan will be able to fund the company’s expansion. It is currently slightly smaller than Shin Satellite and also lags Asia Satellite Telecommunications, which currently has 93 transponders to Binariang’s 30.
Krishnan wants to launch four more satellites, and as a listed company that should be easier to finance.
Krishnan is an interesting figure. He is one of four Malaysians to reach the Forbes billionaire list (the only one of the four not to be ethnic Chinese), and is a media baron. He controls the Measat broadcasting empire that goes under the brand name Astro in Malaysia.
Moreover, he also controls Tanjong, a former tin company that he reversed his National Lottery and horseracing gaming businesses into.
Even more striking, he controls Maxis, Malaysia’s biggest mobile phone operator, with 1.7 million subscribers. He has plans to list Maxis and has recently bought out the UK's BT of the 33% stake in Maxis for M$1.9 billion.
He is also making a bid for Singapore’s second operator, M1 (which has one of three 3G licenses in the Lion City), and if successful, this could form part of a regional strategy. A listing of the combined Maxis/Mobile One would be a very interesting mandate for the winning investment bank since with 2.5 million subscribers it would be the biggest unlisted cellular company in Asia.
Aided in this process, Krishnan is rumoured to have been in talks with SingTel, which may take a stake in Maxis, and thus hope to get an exposure to Malaysia, as well as influence over its competitor, M1.
The other party rumoured to be interested in Maxis, is NTT DoCoMo, which is eager to export its technology across Asia.
In the Malaysian Tobacco deal, Krishnan has not appointed an adviser, although Malaysian Tobacco is being advised by AMMB.
