The (Selangor) water (deal) just got sticky

Last time I said that Tan Sri Khalid made a great move on the Selangor water acquisition plan. He seemingly backed off from a long drawn battle with Punchak Niaga and Syabas, but instead of pulling out, he merely passed the baton of battle with the two to the hands of the Federal Governmental under Section 114. The target companies would have a handful to manage, both the disposal as well as the water operations (under section 114, the must be no water disruption).

Tan Sri now have more free hand/time and could use that to deploy other means to push the battle on, now from a different angle. He made some hints on the water license and the shares of Punchak dropped 7% (read here). Of course many analyst will say that the value of Punchak should not be affected, but value and price are two different thing - and the shares in the hands of the shareholders are worth its price rather than value. The shareholders must be hurting.

This is a masterful stroke in a hostile M&A. Will be watching what happen next with great interest.

Part of the article from the STAR is reproduced here:

PETALING JAYA: The water sector continues to be murky, as uncertainties arise with the latest raw water licence termination among Selangor concessionaires.
That aside, it was business as usual for the water concessionaires, pending more clarity.
RHB Research Institute analyst Kong Heng Siong said a check with the water concessionaires showed they were running their operations as usual.
“I have called the companies and it seems that everything remains status quo. I am not sure what the Selangor Mentri Besar Tan Sri Khalid Ibrahim is hinting at with the raw water licence termination, but I hope the Federal Government is leaving the discussion for now since it has invoked Section 114 of the Water Services Industry Act 2006 (which means there will be no water supply disruption).
“The water treatment plants have not received any notification from the Selangor state government about the licence being removed and I believe the Federal Government is still finalising its offer to take over the water assets,” he told StarBiz.
On share prices of affected companies tumbling following the news of the licence termination, Kong said he felt there was no reason for investors to lose confidence yet, as there were no clear signs of what the Federal or state Governments would do next.
“At the moment, I am taking Khalid’s statement with a pinch of salt and will wait for the Federal Government to come back with its final offer,” he added.
Puncak Niaga Holdings Bhd fell 23 sen, or 7%, yesterday to close at RM3.05 on a trading volume of 7.83 million shares, while Gamuda Bhd closed at RM4.40, nine sen or 2% down, with 10.6 million shares trading hands.
Affin Investment Bank analysts Ong Keng Wee and Chong Lee Len said the research house was also awaiting confirmation and comments from Puncak Niaga and Gamuda on the issue. It, however, did not think there will be any negative outcome from this.

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