DRB-Hicom Bhd/EON ... Nov 2008

DRB-Hicom could emerge as a shareholder of Proton holdings Bhd, once the consolidation of DRB-Hicom’s EON Bhd unit and Proton Edar Sdn Bhd, the distribution arm of proton, takes place.

Industry observers say one proposal being mulled involved DRB-Hicom buying up all the non-Proton related business under EON, and injecting the company into Proton for shares.

A top official of EON confirmed that this was one of the possibilities, but declined to elaborate, saying that the matter was being discussed by EON’s parent, that is, DRB-Hicom.

EON and Proton Edar are both involved in the distribution of Proton vehicles, where EON is a master dealer for national automaker, while Proton Edar is the wholly-owned distribution arm of Proton.

Among the non-Proton related cars under EON are, the Audi, Volkswagen, Mitsubishi and Suzuki franchises.

Some assets under EON have already been taken over by DRN-Hicom, such as a 26-acre plot of land in Glenmarie, which DRB-Hicom is now in the midst of developing.

At present, DRB-Hicom is in the midst of placing a price tag on EON, to determine the number of Proton shares it can negotiate for.

EON is 79.1% controlled by DRB-Hicom has been suspended from trading since Jan 2008 due to a lack of public shareholding spread, which stands at only some 8.8%. At present, Proton’s largest shareholder is state controlled investment arm Khazanah Nasional Bhd, which has 42.7% equity in the automaker.

The companies had earlier said that their aim was to work towards possible collaboration in rationalizing the existing Proton-EON distribution sales and services network as well as the rationalization of investee companies within the Proton Group.

Much of EON’s woes have been a result of intense competition with Proton Edar.