Khazanah sells 5% stake in Telekom Malaysia

Khazanah Nasional, the state-owned Malaysian investment company, yesterday sold a 5% stake in Telekom Malaysia through a block trade, raising M$581.3 million ($180 million). This was its fourth sell-down in a Malaysian portfolio company in less than a year, indicating it is continuing its strategy of divesting domestic companies to help increase the free-float, while at the same time continuing to diversify its own holdings through investments overseas.

The sell-downs at least appear to be welcome by investors and last night's deal attracted a lot of demand. Few details were available about the transaction or who bought the shares, but the fact that the offering closed within one-and-a-half hours shows that it was a fairly easy sell. Maybank and Nomura acted as joint bookrunners.

Khazanah offered 178.87 million shares at a fixed price of M$3.25 apiece, which represented a 2.7% discount versus yesterday's closing price. However, with two hours left of yesterday's trading session, the share price fell 2% from M$3.38 to M$3.31, suggesting that the pending sale may have leaked to the market. The stock recovered parts of the drop to close 1.5% lower at M$3.34, but the decline may have made it slightly easier to get investors to accept the tight discount.

The discount was particularly tight in light of the fact that the deal accounted for about 35 days' worth of trading volume, making it quite difficult for investors to exit quickly, should they wish to do so. The most recent block trade in Malaysia -- a $185 million sell-down in Lafarge Malayan Cement on July 15 -- was priced at a 3.7% discount.

Telekom Malaysia, which is the country's largest mobile operator, has risen 7.4% following a dip in mid-May and is up 9.2% so far this year, making this a reasonably good time to sell. Khazanah will still hold about 36% of the company, however, suggesting that the sale was little more than a minor portfolio adjustment.

That said, it did come at a time when Khazanah is embroiled in a battle with India-based hospital operator Fortis Healthcare for the control of Singapore-listed Parkway Holdings. Khazanah has offered to buy 313 million shares in Parkway at a price of S$3.78 apiece, which would bring its total holding in the company to 51.5% at a total cost of S$1.18 billion ($856 million), while Fortis has made a competing bid for the entire company at S$3.80 per share. Fortis already owns 25.27% and, if the remaining shareholders were to accept its offer, it would cost approximately S$3.2 billion.

In recent days, various analysts have said they expect Khazanah to increase its partial offer to more than S$4 per share to convince Fortis to throw in the towel. The money raised from the sale of Telekom Malaysia shares could come in handy if it decides to go ahead and increase its offer. Singapore-listed Parkway operates hospitals primarily in Malaysia and Singapore, but also has selected interests in Brunei, India and China.

A couple of weeks ago, Khazanah also agreed to buy Rs3.8 billion ($81 million) worth of compulsorily convertible preference shares in Infrastructure Development Finance Company (IDFC), an Indian institution that provides financing for various infrastructure projects. The investment came after IDFC raised $575 million from a qualified institutional placement in late June. Khazanah already owned close to 9% of IDFC before this investment.