There are worries that Sime Darby might have to launch a mandatory general offer (MGO) for the rest of the shares in Eastern & Oriental Bhd (E&O), which would incur substantial costs for the conglomerate.
Sime Darby's acquisition of the remaining 70% of E&O would cost an additional RM1.8bil on top of the RM766mil cash it was paying for the 30% stake, assuming it paid the RM2.30 per share to buy the 30%. In total, that would rack up a hefty sum of RM2.55bil for Sime Darby.
Based on Sime Darby's historical five-year capital expenditure (capex) of RM2bil annually, the RM2.55bil price would effectively eat up all the company's capex for 2011. In short, there would hardly be any money left to be used to expand its other operations, which include its plantation and automotive businesses.
Sime Darby's current cash pile stood at RM4.9bil.
Sime Darby president and group chief executive Datuk Mohd Bakke Salleh had saidthat Sime Darby would only make a GO at the right time and that he was comfortable with its current 30% stake and purchase price for E&O shares.
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