KUALA LUMPUR, Malaysia -- Shares of Malaysian national car maker Proton jumped as much as 8 percent Friday on speculation that Germany's Volkswagen AG will take control of the struggling automaker.
Khazanah Nasional Bhd., the government's investment arm that owns 42.7 percent of Proton, is in talks with the Wolfsburg, Germany-based automaker to sell up to 30 percent of the Malaysian company, according to a person familiar with the talks.
"The deal could be worth 10 ringgit a share," or $2.67, the person said on condition of anonymity due to the sensitive nature of the deal. At that price, the stake will cost VW some 1.65 billion Malaysian ringgit ($440 million).
The deal could come with management control of Proton, the person said.
Khazanah confirmed that discussions were being held on Proton's "proposed alliance with Volkswagen" but said it "does not have any plans at this point to divest all or part of its existing stake in Proton."
However, it said it is seeking ways to enhance shareholder value.
VW officials said Friday they were in talks about their cooperation and work with Proton and future plans, but were far away from any concrete solutions or decisions. They would not comment on the reports about a 30 percent stake.
Proton's domestic market share has drop from 57 percent in 1993 to around 30 percent in June as the government lifted protective tariffs on foreign-made cars due to a regional free trade agreement. The duties had earlier kept the prices of foreign cars artificially high, making Proton the only affordable cars for most Malaysians.
South Korea's Hyundai Motor Co. and Japan's Nissan Motor Co. have also chipped away at Proton's business by introducing locally assembled models at competitive prices.
Investors bid up Proton's stock on hopes that Volkswagen would help the company's ailing fortunes. Proton shares surged as high as 8.1 percent to 10 ringgit when the market opened Friday before falling back to 9.25 ringgit, up 1.1 percent from Thursday.
It wasn't immediately clear how a deal might be structured, but it is likely that Khazanah may want to retain a "golden share" in the company. Such shares, common in state-linked companies, give the government veto powers over key strategic decisions.
The possible equity sale followed Monday's removal of embattled chief executive Mahaleel Ariff, who has been at odds for months with Proton's board of directors over strategic issues such as the prospect of giving up majority control to a multinational manufacturer to counter foreign competition.
http://www.detnews.com/2005/autosins...tos-263926.htm
VW Taking Over Proton?
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