In a statement issued yesterday, LTAT gave further insights as to why it had a change of mind on this privatisation plan for Boustead. LEMBAGA Tabung Angkatan Tentera (LTAT), which scuttled the potential privatisation of Boustead Holdings Bhd, said the change of events were the primary reason why it abandoned the takeover deal. In a statement issued yesterday, LTAT gave further insights as to why it had a change of mind on this privatisation plan for Boustead. “To reiterate, circumstances have indeed drastically changed since we first commenced on this journey back in May 2020 and volatility due to the Covid-19 pandemic continues to impact the businesses of Boustead and its subsidiaries, particularly the heightened business risks of the group, ” LTAT says. LTAT says that in May 2020, when the plan to privatise was first announced, it was in the midst of executing its strategic transformation plan, a component of which involved the need to rebalance its portfolio. “As at end-December 2020, LTAT’s asset allocation remained heavily invested in public equity at 58%, with the Boustead Group accounting for 31% and the Affin Group accounting for 17% of our total assets under management of RM9.6bil, respectively, ” LTAT says.Boustead shipyard - File pic) “In the past, LTAT has been heavily reliant on dividend income from Boustead. However, since 2019, Boustead and some of its subsidiaries have not paid any dividends to its shareholders due to its worsening financial performance, driven by major impairments against a backdrop of challenging economic conditions, ” it says. The fund notes that Boustead’s share price then, which had reached a rock bottom of 35 sen in March 2020, had provided an opportune time for it to be privatised. “It was also probably the right time and opportunity for minority shareholders to potentially exit, given the underperforming share price in spite of the higher underlying value, relative to its net tangible assets (NTA) of RM1.60. “The NTA was possibly not accorded by the market for reasons, which may include declining profitability, high debt levels and uncertainties surrounding certain key projects of the group, primarily the LCS project and other key projects such as hotels and property, ” LTAT says. LTAT says that it had then wanted to protect the value of its investment, as well as to pave the way to support the potential restructuring of Boustead. “Since our initial notice to media, the extension of time was required to allow LTAT to undertake all the requisite preparations, which included securing funding and resolving the privatisation mechanism and structure as well as the preliminary regulatory approvals required by the relevant authorities. “Unlike other privatisation exercises, LTAT’s circumstances are unique, given that it is governed by the Tabung Angkatan Tentera Act 1973, ” it says. LTAT says the change in decision to not privatise Boustead would allow it to review and reassess its strategies as part of its intention to fully assess and further fine-tune its five-year strategic transformation plan. The fund says that the change of mind not to privatise Boustead is due to the continued Covid-19 pandemic that is causing uncertainties to its banking, hotels, property and retail petroleum divisions, among others. It further explains that this change is also due to the ongoing uncertainty with regards to the LCS project and the new leadership at Boustead, which would require sufficient time to review the ongoing projects and initiatives. “LTAT remains steadfast in continuing its transformation journey towards becoming a world-class pension fund. “In line with our contributors’ retirement objectives, LTAT shall remain true to its nature as a long-term investor and a custodian of patient capital, hence we shall not hesitate to be judicious in carrying out our investment strategies, ” the fund says. LTAT says its current focus is to execute its strategic asset allocation framework, which was completed at the end of last year. “LTAT intends to rebalance its portfolio by increasing fixed-income investments (20%), reducing real estate and private equity exposure (10% each), increase diversification of its public equity portfolio (50%) and the remaining in other asset classes including money market instruments. “At a later stage, LTAT also intends to commence its plan for an international diversification similar to other peer institutions.” The fund says the strategic transformation plan would take “a few years” to be realised and is still a work in progress. “LTAT will continue to assess its options in respect of creating value from its existing key investments, including reviewing merits of any potential value creation exercise, subject to commercial viability to LTAT and Boustead, within the regulatory boundaries, ” it says.
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