KUALA LUMPUR (March 4): Lembaga Tabung Angkatan Tentera (LTAT) or the Armed Forces Fund Board on Thursday (March 2) made an offer of 85.5 sen a share or a total of RM703.25 million for the 40.48% stake in Boustead Holdings Bhd it didn’t already own.

While the privatisation has been speculated on for some time, the offer of 88.5 sen — although it is a 22.39% to 38.19% premium to Boustead’s share price over the past year — is only about 52% of Boustead’s net asset value per share of RM1.64 as at end-December 2022.

There are also some who question the timing of the privatisation, just after Boustead’s 51.8% pharmaceutical unit Pharmaniaga Bhd undertook an impairment to the tune of a whopping RM552.3 million, which nudged it into the cash-strapped Practice Note 17 (PN17) category.

While Pharmaniaga’s impairment is current, Boustead Heavy Industries Corp Bhd (BHIC) — in which Boustead has a 65% stake — has been grappling with a RM9.13 billion contract awarded in 2011 to build six littoral combat ships.

The issues stem from the government having paid RM6.08 billion or 66.59% of the total contract cost to the Boustead group of companies, but still it has nothing to show, although the first of the six ships was slated for delivery in April 2019, with the remaining five to be delivered on a staggered basis.

The six ships as at end-August last year were in various states of being built, with the first vessel 44% completed, while the others were between 0% and 35% done.

If this wasn’t bad enough, Boustead Plantations Bhd, a 57.42%-owned unit of Boustead, had issues a few years ago after the acquisition of some 11,600 hectares of palm oil estates for RM750 million created a stir as the valuations were deemed high.

In a nutshell, other than Affin Bank Bhd (in which Boustead owns about 20%), the other key companies in the Boustead stable are not doing well, and could require some form of bailout.

In the midst of all this bad news, will the minorities of Boustead accept the 85.5 sen offer, or will they stay on with Boustead, thwarting LTAT’s privatisation plan?

LTAT chief executive officer Datuk Ahmad Nazim Abd Rahman is confident the privatisation of Boustead will go through, after which he can plan to start cleaning up the fund's key investment in the Boustead group.

Read the story and interview in the March 6 issue of The Edge Malaysia weekly.

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