Not Selling MV Agusta Shares Would Have Put Proton In RM1 Bln Debt

KUALA LUMPUR, Oct 15 (Bernama) -- Datuk Seri Najib Tun Razak said the decision to dispose off Proton's shares in MV Agusta Motors Spa (MVAM) was taken after detailed study was made and found that by not making the sale, Proton would have been burdened with an estimated more than RM1 billion debt.

The Deputy Prime Minister said Proton had originally planned to revitalise MVAM's position and during the time of the purchase of the shares, MVAM was facing financial difficulties and recording losses.

"Without additional capital injection, MVAM was facing the possibility of bankrupty which would have brought even a larger loss to Proton," he said in his written reply to a question from Wee Choo Keong (PKR-Wangsa Maju) at the Dewan Rakyat here Wednesday.

Najib, who is also Finance Minister, said that at the same time Proton also required financial resources to recover the performance of its main activity - which was the manufacture and sales of its cars.

"Based on these financial constraints and status, and considering the short and long term effects on Proton's financial and and commercial operations, the Proton Board of Directors decided to dispose the shares in MVAM," he said.

He said the decision was also made following a detailed study carried out by a consortium of advisors including Credit Suisse First Boston and several Italian law firms who were of the opinion that the MVAM business could not have been sustained in terms of operations and finances.

"Besides that, MVAM required a large and steady flow of investment for a long term period from Proton, while the integration of MVAM and Proton operations would have not provided the economy of scale and synergy and there was also the possibility of bankruptcy for MVAM."

Najib said the choice of the consortium of advisors were based on their international networking and experience as well as wide experience in the automotive industry and expertise in related areas and not just expertise as financial advisors.

"Proton also received advice on the appropriate share disposal value.

"Yet, taking into view that MVAM had two negative shareholders fund and deficit cashflow, MVAM also recorded continued losses.

"MVAM recorded a post tax loss of 118.57 million Euros for a six-year period until Dec 31, 2005 and it was difficult to get a sales value other than the nominal value," he said.

Najib said the sale of Proton's shares in MVAM cannot be likened to that of the sales of Huqsvarna to BMW as reported, considering the time and the contents of the transactions which were very different.

"As an example, the amount of liability associated with the Huqsvarna sales transaction was not reported clearly and officially by the parties involved. So was the case with the sales of Harley Davidson," he said.