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Bernas going private at whose expense?

December 16, 2013

Dzulkefly Ahmad (TMI) 15 December.

Going by Corporate Finance 101, voluntarily delisting a public-listed company from the stock exchange and taking it private brings both pros and cons.

For a struggling business entity, it could provide the freedom and flexibility it requires to find its feet again away from the weight of public scrutiny.

The company would also like to go private should it feels that it is undervalued by the market. It may believe that the requirements of conforming to various regulations of the authority, namely the Security Commission in the case of Malaysia, are too burdensome.

Going private would surely allow for it to pursue new strategic approaches in line with longer timeline objectives, and hopefully be more competitive.

But conversely, it also carries the risk of the company incurring more debt later on if the private company could not get enough private capital or new strategies fail to turn around the company.

The delisting of Dell, and more recently of Blackberry, provided for both interesting academic and strategic discussion on the subject of listed company going private. But such exciting discourse on the local shore however, especially of late, is faced with a very grim picture of greed as the overarching reason for “privatisation”. This is extremely unfortunate to say of the least and “scandalous” at worst.

Padiberas Nasional Berhad or Bernas is a very illustrative case in point. Bernas which has played the role of regulator and distributor for the country’s rice industry was first privatised in the heyday of privatisation of Tun Dr Mahathir Mohamad.

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