Are the Lotus racing programs now in jeopardy?
01/18/12 “For my side, there’s no problem," Director of Lotus Motorsport Claudio Berro told SPEED.com. “As far as we’re aware, the situation in Malaysia changes nothing for us. Our support and development is very strong, and our focus again is delivery of our business plan, and motorsports is a crucial element of the business plan."
“Lotus is a small company and INDYCAR knows," Berro said of the supply issues they are trying to overcome.
“At the moment, we have four teams, with six cars for sure. We have a short time to produce more engines, and work hard to produce more engines. The problem is the supplier for critical parts in the engine, not produced by us. It is critically late. It’s is quite difficult to supply a lot of cars for the first race. This is very clear. We are in talks with INDYCAR. INDYCAR knows our limit[ed] numbers of engines. The car just [ran] and it is difficult to validate some components [prior to track testing]."
01/17/12 A Lotus spokesperson told AR1.com, "As far as we are aware, the situation changes nothing for Lotus, Proton's support in our development remains very strong and our focus, as always, is on the delivery of the business plan. This includes our motorsport programs."
01/17/12 Proton has not made a profit in the last two years, multiple prospective buyers stepped in for acquisition talks before the controlling stake was finally approved for DRB-Hicom, a large conglomerate with a hand in automotive services, transport, and power generation.
This investment effectively hands DRB-Hicom the control of two Malaysian car plants that are capable of producing a combined 350,000 vehicles a year. This production number may increase in the future as General Motors just reached out to Proton last month about a possible manufacturing joint venture in Malaysia so that GM could gain better access into the Southeast Asian market. The talks are not yet complete and it will be interesting to see what effects DRB-Hicom will have in the discussions.
What’s more, DRB-Hicom is also the new private owner of Lotus. Unfortunately, this change puts the future of Lotus into question. Lotus has not been able to make a profit for Proton since 1996, an equities investor suggested that all or part of Lotus would likely be sold. Among those interested in Lotus is Genii Capital, a part owner of Lotus Renault GP.
Will the new owners conclude that Lotus is too small a company to be spending money on so many racing programs and decide to eliminate all or some? If Lotus was turning a profit, likely not, but since Lotus is a money-losing company, if we had Lotus engines or backing it would be wise to keep one's ear to the ground.
01/16/12 A few months ago I suggested that the Malaysian government was on the verge of offloading Group Lotus to billionaire Syed Mokhtar Al-Bukhary and a consortium of other businessmen, in a deal put together by Lotus F1 Team owner Gerard Lopez. Things then went quiet for three months, presumably as the deals were sorted out. The government has now announced that Syed Mokhtar’s DRB-Hicom is buying Proton, the national car business – which owns Lotus – from one of the government’s holding companies. This is being announced as part of the government’s plan to divest itself of some of its industrial businesses in order to make them more competitive, and boost the Malaysian economy accordingly.
It will be interesting to see whether or not this will have any effect on the ownership of Group Lotus, which is supporting the activities of Lotus F1 Racing in Formula 1 – which is why Lopez was involved. Syed Mokhtar is reported to have paid $410 million for control of the business – which is not a huge amount, although the government can justify the price as a successful deal, given the poor returns that Proton has been producing in recent times.
DRB-Hicom distributes and assembles vehicles for Volkswagen and Mercedes-Benz in Malaysia, but the deal means that he will now control the two Proton factories, which have the capacity to make a combined 350,000 vehicles per year. It seems that the delays in getting the deal sorted out came because Proton chairman Mohd Nadzmi Mohd Salleh was also busy trying to buy the government shares in the business.
Syed Mokhtar is not saying from where the money is coming, but it is possible that part of the plan is to sell Group Lotus to help finance the purchase of Proton and DRB-Hicom will then set about assembling more cars in Malaysia, while also trying to improve Proton’s sales and image. That would leave Lopez and whatever investors he can find to buy Lotus, or at least a significant share of it, which would allow him to be in a position to have a more stable relationship between the car company and the F1 team and – because he is an ambitious soul – the chance to build Group Lotus into a stronger company. Whether this will include Group Lotus’s current CEO Dany Bahar or not, remains to be seen. Joe Saward
Billionaire Syed Mokhtar Al- Bukhary’s DRB-Hicom Bhd. (DRB) agreed to buy Lotus sportscar-owner Proton Holdings Bhd. (PROH) for 1.29 billion ringgit ($410 million), in Malaysia’s biggest automotive takeover since 2000.
The automobile assembler will buy 234.7 million Proton shares, a 43 percent stake, for 5.50 ringgit apiece from state-owned Khazanah Nasional Bhd (KNBZ)., DRB-Hicom said in a statement today. The offer, which is 6.2 percent higher than the Malaysian carmaker’s last closing price, will be extended to all remaining stockholders, according to the statement.
Proton, headed for its second year of profit declines, paves the way for Syed Mokhtar to widen his share of the Southeast Asian country’s car industry and expand a business empire that already includes ports, airports and power plants. The agreement comes a month after former Prime Minister Mahathir Mohamad, who founded Proton in 1983, said he endorsed DRB-Hicom’s bid.
“There are lots of synergies that could be gained between DRB and Proton," said Ahmad Maghfur Usman, an analyst at OSK Holdings Bhd. (OSK) in Kuala Lumpur. “Proton still needs a massive overhaul from DRB."
Proton, up 93 percent since November, last closed at 5.18 ringgit before it was suspended from trading today pending the announcement. DRB-Hicom, which distributes and assembles vehicles for Volkswagen AG and Daimler AG (DAI)’s Mercedes-Benz, last traded at 2.17 ringgit before the stock was halted.
Bigger Than Switzerland
The offer values Proton at 24 times estimated earnings for next fiscal year, compared with the average multiple of 13 for the Bloomberg Asia Pacific Auto Manufacturer index.
Proton gives DRB control of two Malaysian car plants with the capacity to make a combined 350,000 vehicles per year –more than the total number of cars sold in Switzerland annually.
DRB-Hicom, which hired Malayan Banking Bhd. (MAY)’s investment banking arm for the deal, beat Proton Chairman Mohd Nadzmi Mohd Salleh, who had also sought to purchase the controlling stake in Malaysia’s first automaker from Khazanah. DRB, which may use internal funds or borrow externally to fund the purchase, said it expects to complete the deal by the second quarter.
Mahathir, who was Malaysia’s prime minister for two decades, said in a joint interview Dec. 12 that Proton should be sold to DRB-Hicom — a company he described as being well-run and having the capacity to turn around Proton without undermining its vendors. Mahathir is a Proton adviser.
Malaysian Billionaire
Syed Mokhtar, 60, is the Southeast Asian nation’s second-youngest billionaire after Berjaya Corp. Chairman Vincent Tan, according to Forbes magazine’s latest rankings. His ties to Mahathir, who describes the Malaysian tycoon as a friend, stretch back more than a decade. About a year before Mahathir stepped down in 2003 as prime minister, he awarded a $3.8 billion rail project — then the nation’s biggest infrastructure undertaking — to contractors including Syed Mokhtar’s MMC Corp.
Selangor-based DRB manufactures, distributes and assembles a range of vehicles from motorcycles to garbage trucks for global carmakers from Volkswagen AG (VOW) to Suzuki Motor Corp. (7269) and Daimler AG’s Mercedes-Benz. It has eight assembly plants, of which four are for cars.