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An Analysis of Why Public Listed
Companies Go Private in Malaysia

Lau Chee Chin @ Lau Cheung Chang
Bachelor of Commerce
Flinders University of South Australia
1998

Submitted to the Graduate School of Business
Faculty of Business and Accountancy
University of Malaya, in partial fulfillment
of the requirements for the Degree of
Master of Business Administration
June 2009

AN ANALYSIS OF WHY PUBLIC LISTED
COMPANIES GO PRIVATE IN MALAYSIA

LAU CHEE CHIN @ LAU CHEUNG CHANG

Dedicated to my esteemed
Father & Mother
for showing me that
life is a process and not an event
Also dedicated to my Wife
for been a constant source of inspiration,
mentor and a guide to me.

ACKNOWLEDGEMENTS

First and foremost, I am dearly indebted to my supervisor Prof Madya Dr. M Fazilah Abdul Samad who has been very supportive throughout my research studies. Her keen mind, abilities and expert guidance put me on the right track and enabled me to complete this research. I would like to thank her for the support, encouragement and patience.

My eternal gratitude is to my parents who raised me, taught me, and endlessly encouraged me to see life as a process and not as an event. I am also indebted to my wife for her enormous support, patience, encouragement and the sharing of the burden throughout my MBA programme.

I would like to express my gratitude to my fellow lecturers, the ever helpful administrative personnel and fellow MBA students at the Graduate School of Business at University Malaya. Finally, I must express my sincere appreciation to all those who helped me and those who stood with me during the period of my MBA programme.

LAU CHEE CHIN @ LAU CHEUNG CHANG
MARCH 2009

ABSTRACT

The trends of public listed companies going private in Malaysia‟s stock exchange Bursa Malaysia has experienced a surge with 17 public listed companies being taken private in the first half of the year in 2007 together with approximately RM46.29 billion of market capitalisation being “wiped out” from our local bourse Bursa Malaysia.

In contrast, Bursa Malaysia only added RM3.74 billion in market capitali sation from the new public listing of 16 companies within the same period. Global leverage buyout volume for the first six months in the same period was estimated at US$450 billion (RM1.56 trillion), more than double the whole of last year 2006.

For the year of 2008, there have been already 29 privatisation proposals and only 18 new public listing on the Bursa Malaysia.

Traditionally, private companies going for public listing was a sign that a company had reached a certain threshold of size and profitability to attract public investors for further funding requirements and the expansion of business.

This study aims to examine this new trend on the Bursa Malaysia and also to find out the reasons for the public listed companies for choosing to go private whereby it is the reverse of a public listing exercise.

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION …………………………………………..1 1.1 BACKGROUND ………………………………………………………. .1 1.2 OBJECTIVE OF STUDY……………………………………………….9 1.3 SCOPE OF STUDY……………………………………………………10 1.4 PURPOSE AND SIGNIFICANCE OF THE STUDY ………………..11 1.5 LIMITATIONS OF STUDY…………………………………………….12 1.6 ORGANISATION OF STUDY…………………………………………13 CHAPTER 2: LITERATURE REVIEW ………………………………......12 2.1 EFFICIENT MARKET HYPOTHESIS………………………………..15 2.2 UNDERVALUATION HYPOTHESIS………………………………...17 2.3 LIQUIDITY AND CHEAP FUNDING…………………………………19 2.4 FREE CASHFLOW…………………………………………………….20 2.5 REGULATORY CONSTRAINTS……………………………………..23 CHAPTER 3: RESEARCH METHOLOGY………………………………31 3.1 METHODOLGY ………………………………………………………...33 3.2 VALUATION…………………………………………………………….34 CHAPTER 4: RESEARCH ANALYSIS AND RESULTS………………55 4.1 RESULTS……………………………………………………………….55 4.2 ANALYSIS………………………………………………………………59 CHAPTER 5: SUMMARY AND CONCLUSION ………………………....73

CHAPTER 1
INTRODUCTION
1.1

Background

The number of public listed companies going private has...
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