Proton-Geely FSP deal in detail – what DRB-Hicom, Geely and the Malaysian government will be getting

Now that the definitive agreement for the Proton-Geely partnership has been signed, DRB-Hicom has revealed more details about Proton’s turnaround plan. On hand to feed the information to the media was Datuk Sri Syed Faisal Albar, group managing director of DRB-Hicom.

During his presentation, Faisal explained the roles played by the government, Zhejiang Geely (ZGH), DRB-Hicom and other parties in relation to Proton, and we start with the carmaker’s new partner – Geely.

Firstly, Geely will provide Proton with a consideration (funding) amounting to RM460.3 million, with RM170.3 being a cash injection, and the remainder being the cost of supplying the Boyue SUV platform. According to Proton, the valuation of the Boyue platform was undertaken independently by KPMG.

The total consideration is what Geely is fronting to acquire its 49.9% stake in Proton, which has an implied post-money valuation of RM922.4 million. It was also revealed that the implied pre-money valuation of Proton amounted to RM462.1 million – the value of DRB-Hicom’s remaining 50.1% stake.

Proton-Geely FSP deal in detail – what DRB-Hicom, Geely and the Malaysian government will be getting

Research and development will be an important aspect of the partnership, with Geely assisting Proton in terms of acquiring the latest technologies. Additionally, Proton’s R&D division will be transformed into one of Geely’s global centre of excellence, allowing it to develop future models.

There’s also the matter of Proton relocating its operations to Tanjung Malim, which will allow it to be a manufacturing hub for right-hand drive Geely models. As the Chinese company will be supplying platforms and technologies to Proton, it will also impart its management expertise relating to manufacturing to ensure compliance.

As for the assembly of Volvo cars at Tanjung Malim, Faisal said this is a possibility if there is excess capacity that can be spared to do so. This will also provide local vendors with the opportunity to be part of a global shared purchasing system, encouraging business growth outside of Proton.

With Geely’s side explained, what about the government then? For starters, the remainder of Proton’s RM1.5 billion soft loan in the form of a second redeemable convertible cumulative preference shares (RCCPS) issue (RM250 million) that will be released today following the signing.

Proton-Geely FSP deal in detail – what DRB-Hicom, Geely and the Malaysian government will be getting

Moving on, we arrive at the grant requested by Proton totalling RM1.1 billion as reimbursement for its previous R&D efforts. The government has said the reimbursement will only be given if Proton finds a strategic partner with a definitive agreement, which now makes the company eligible.

Faisal pointed out that such a request was first submitted as far back as 2010 (before DRB-Hicom’s acquisition), where Proton was seeking RM3.7 billion. On the mention of loans, Proton will also back its syndicated loan of RM533 million to Malaysian banks to ensure a clean balance sheet.

On DRB-Hicom’s end, Proton will transfer all non-automotive assets worth RM1.2 billion to its parent company, and repay all shareholder advances totalling RM567 million. In exchange, DRB-Hicom will also undertake any warranty and unmet volume amounting to RM331 million to ensure a clean slate for the partnership.

Proton-Geely FSP deal in detail – what DRB-Hicom, Geely and the Malaysian government will be getting

In addition, DRB-Hicom will also foot the bill on a new R&D test track, something that is missing in Tanjung Malim. As Proton will vacate from Shah Alam, which is where it currently has a test track of its own, a new one is a necessity in Tanjung Malim for the development of future models.

Aside from its dealings with Proton, DRB-Hicom will have its own engagements with the government arising from this deal, by purchasing RM350 million worth of RCCPS back from the government on behalf of Proton. Faisal revealed that although this purchase isn’t due until 2023, the government requires DRB-Hicom to purchase the RCCPS as part of a deal, before Proton is allowed to undergo any reorganisation.

The government will also forfeit its conversion rights in Proton to show its intent to no longer be involved in the carmaker. These rights will be held by DRB-Hicom, but to ensure the government’s default risk is minimised if Proton is unable to repay its RM1.5 billion soft loan, DRB-Hicom’s RM1.2 billion asset pledge acts as a form of collateral (the remainder should be the RM350 million worth of RCCPS that DRB-Hicom buys from the government).

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Gerard Lye

Originating from the corporate world with a background in finance and economics, Gerard’s strong love for cars led him to take the plunge into the automotive media industry. It was only then did he realise that there are more things to a car than just horsepower count.

 

Comments

  • Ron95 on Jun 23, 2017 at 5:47 pm

    Alhamdullilah

    Like or Dislike: Thumb up 10 Thumb down 0
    • YB Kunta Kinte on Jun 23, 2017 at 5:57 pm

      In this deal, looks like Proton only got RM170 million in cash. Currently Proton is losing RM4 mil per day. It does not have any cash at hand. RM170 million will finish very fast judging from the fact RM1.5 billion finished in 10 months.

      Can Proton sell so many SUVs to make money to pay their workers? It needs to sell about 10,000 units just to break even. Remember, it does not have any cash at the moment.

      Also, in this deal, Proton lost their valueable land that is valued at BILLIONS to DRB aka Syed Mokhtar.

      Did Proton really benefit from this deal? Or did DRB aka Syed Mokhtar benefit from this deal? Looks like the land was the gem that Proton lost.

      Well-loved. Like or Dislike: Thumb up 103 Thumb down 8
      • Low quality geely can it handle the Malaysia weather?

        Like or Dislike: Thumb up 2 Thumb down 16
        • All Tongkat policy bisnes end up like P1. Survival of the fittest.

          Like or Dislike: Thumb up 28 Thumb down 0
          • Najib era no more plotek. Its fighting for business time now.

            Like or Dislike: Thumb up 1 Thumb down 12
          • topkek on Jun 24, 2017 at 5:58 am

            Jepunis also got tongkat – bail out, you dun bash pulak

            Like or Dislike: Thumb up 2 Thumb down 10
          • well, try ukur baju di badan sendri…
            tepuk dada tanya iman

            Like or Dislike: Thumb up 3 Thumb down 0
          • John Ohwai Mental Asylum on Jun 24, 2017 at 8:40 pm

            jepunis not malas and like to sleep

            Like or Dislike: Thumb up 0 Thumb down 2
          • proveme on Jun 27, 2017 at 8:41 am

            Prove me

            Like or Dislike: Thumb up 0 Thumb down 0
      • Kopi pasta kunta on Jun 23, 2017 at 6:21 pm

        Hope proton can make it this time with new management

        Like or Dislike: Thumb up 11 Thumb down 3
        • Pak Ali on Jun 24, 2017 at 6:12 am

          The one who suffer most is crony company thatbsuck Proton blood. With new management, hardly for them to suppky parts without warrant.
          Good luck you all. You alls that created the mess.

          Like or Dislike: Thumb up 5 Thumb down 0
    • YB Kunta Kinte on Jun 23, 2017 at 6:06 pm

      Proton used to have 250 acres of land in Shah Alam. Now, it belongs to DRB upon signing of this Geely deal.

      Listings for industrial land currently quote prices of around RM300 per sq ft in Shah Alam. As 250 acres is large, this can be used to build a mammoth office and commercial complex with the average price of land anywhere between RM300 psf to 500 psf. If we take an average figure, the land price could be RM400 psf.

      That 250 acres in Shah Alam would be worth RM4.4 billion (400 X 250 X 43,560), rounded off to one decimal point, at today’s prices, a huge amount.

      Well-loved. Like or Dislike: Thumb up 75 Thumb down 2
    • Gigili on Jun 23, 2017 at 6:07 pm

      First thing first,scrap Proton.. and by 2020 Geely can be world no carmaker.

      Like or Dislike: Thumb up 3 Thumb down 17
    • Sack designer on Jun 23, 2017 at 8:52 pm

      First thing first by Geely for Proton: Sack the designer!

      Yes, sack the designer!!!

      Like or Dislike: Thumb up 13 Thumb down 1
  • longjaafar on Jun 23, 2017 at 5:52 pm

    Proton price 30% cheaper.

    Like or Dislike: Thumb up 10 Thumb down 0
    • Taboleh. Nanti itu org dtg kata RV dia tadak. Macam mana nanti?

      Like or Dislike: Thumb up 4 Thumb down 4
  • bugiman on Jun 23, 2017 at 7:02 pm

    plotong abalone

    Like or Dislike: Thumb up 1 Thumb down 0
  • Neutral on Jun 23, 2017 at 7:47 pm

    DRB Hicom seems to be the biggest winner of the deal and of course the government and the tax payers the losers. What right does Proton have to demand a further 1.1 billion for its expenditures in R&D which seemed to churn out nothing worthy of mentioning. Didn’t the astronomical billions provided by the government enough? Whether or not Geely will turn Proton around still remains to be seen. If the new JV couldn’t compete with other players in auto industry on equal footing then we Malaysians are back to square one.

    Like or Dislike: Thumb up 13 Thumb down 0
    • Ollie on Jun 26, 2017 at 2:49 am

      Shouldn’t the government give the RM 5 BILLION to all the poor car buyers who were forced to buy proton as they were unable to buy foreign cars. Now they are stuck with a junk with poor service and unable to rely on proton to be around to maintain the car. 70000 protons were sold last year. Rm5 billion would mean each of them get a full refund of RM 70,000 for each car. Can the proton buyers demand that? Or all those that bought proton are blind govt supporters. Actually minus 30,000 cars sold to govt entities, each buyer would get rm100, 000 each. Govt has given rm5 billion in total to proton since 2015 if you dispute the figure. Total sales to retail buyers is around 100000 in 2 years. So at least rm50, 000 to each buyer.

      Like or Dislike: Thumb up 1 Thumb down 0
  • ccy7218 on Jun 23, 2017 at 8:26 pm

    Seems the biggest gainer here are Geely and DRB, Geely selling the Boyue platfom for 290 million, what a joke… dun think it worth that much while DRB gaining big on the land deals… The biggest loser here is Proton who lose its land to DRB…

    Like or Dislike: Thumb up 9 Thumb down 0
  • ccy7218 on Jun 23, 2017 at 8:30 pm

    In my 2 cent opinion, Geely is aiming more on lotus and gamble on Proton… they wish to develop the sports car segment… paying 170 millions is peanut to the chinese yet they sold the Boyue platform at a very high mark up price, so even they lost the 170 million altogether, it is actually covered up by the Boyue platform, understand??

    Like or Dislike: Thumb up 12 Thumb down 2
  • ccy7218 on Jun 23, 2017 at 8:32 pm

    And at the same time, they gain entry into the tanjung malim plant to assemble their volvo… Seems this time we really got cheated… Oh no…

    Like or Dislike: Thumb up 4 Thumb down 2
  • 2 things caught my attention.

    1.The 1 billion over R&D grants which is basically taxpayers money down the drain.

    2.The transfer of non-automotive assets to DRB-Hicom. Just look at the massive potential of the Shah Alam land.

    Well… this is Syed Mokhtar’s ‘expertise’. Same modus operandi when he acquired Pos Malaysia. He tried his luck with KTMB but was rejected. Not to mention countless successful proposals to government – seaport, airport etc etc

    Makes me wonder if this whole exercise could have been done by government itself when it was still the owner. Taxpayers would have still owned the land.

    This guy really knows how to cari makan. He made tons of money during Mahathir time, went quiet during Badawi time, and now he resurfaces again.

    Like or Dislike: Thumb up 27 Thumb down 1
    • Nope. Dun forget P1 was alredi privatised when sold to DRB. So DRB technically can do whateva it wants with it. Besides, if gov did this, the backlash from Dark side wud be even more relentless.

      Like or Dislike: Thumb up 0 Thumb down 5
      • Read the 2nd last paragraph in case you missed the point. Don’t talk about technicality.

        That piece of land could’ve been turned into mass public housing. We already knew DRB-Hicom has never been serious when they turned back to government to ask for more free money and the best they could come up with was a rebadged Honda and a failed motorsports program. And now they say they can’t do it, which is not a surprise at all.

        I support the sale to Geely, just not in this manner. As a taxpayer, I feel robbed.

        Like or Dislike: Thumb up 3 Thumb down 0
    • Jimmy on Jun 23, 2017 at 11:04 pm

      I am Boneka.

      Like or Dislike: Thumb up 0 Thumb down 0
    • owaief on Jun 23, 2017 at 11:18 pm

      TakNak kroni. Korupsi, oppressi, obsessi diri
      Polussi, depressi di bumi kini

      Oo… anok-anok…

      Like or Dislike: Thumb up 15 Thumb down 0
  • Sam Loo (ori1) on Jun 23, 2017 at 11:37 pm

    Consider a used Hyundai. Fantastic value for money

    Like or Dislike: Thumb up 4 Thumb down 4
  • Rawfi on Jun 24, 2017 at 9:18 am

    Every year gov’t give more than what Geely does. From the start I only heard about the SUV that proton will use as platform, what is the point this colabration if it was just as same as previous proton mitsu/suzuki/honda & etc. Hope it was just me thinking that it just a distraction on other bigger issue. Some one should advise proton stop making car if they want to save money, the more proton make car the more they lose money.

    Like or Dislike: Thumb up 1 Thumb down 0
  • Wait and see jer mampu . Up too you laa

    Like or Dislike: Thumb up 0 Thumb down 0
  • drMpower on Jun 24, 2017 at 6:29 pm

    So now we must have cheaper foreign cars. Now that proton is no longer the government’s then we must not afford protection to it again. Plus with Geely as the co owner then it must take care of proton as a whole including getting it sold outside. No protection is therefore required anymore
    But why the absolute silence on this by the government?

    Like or Dislike: Thumb up 0 Thumb down 0
  • Shah Rizan Bin Ahmad Razi on Jun 24, 2017 at 8:43 pm

    Haram tak faham. Si A bayar to Si B. Si C clear debt from Si A. Si B transfer aset to Si D

    Like or Dislike: Thumb up 1 Thumb down 0
 

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