Sime Darby Berhad has set its sights on acquiring the UMW Group, via the purchase of the majority stake of Permodalan Nasional Berhad (PNB) in UMW. PNB currently has a 61.2% share in UMW and has been offered RM5 per share for a total of RM3.57 billion.
The new development, which would be subject to regulatory and shareholder approvals, is expected to be completed in 3 months with a view of finalisation by early 2024. Provided it does proceed, Sime Darby will then make a general offer for the remaining 38.8% stake with the aim of delisting UMW from Bursa Malaysia.
Should Sime Darby acquire UMW, it would also mean that it will become involved in the Toyota and Lexus business and more importantly, Perodua, in which UMW has had a 38% share since the establishment of the Malaysian carmaker. This would give Sime Darby, which has its own Motors unit, a very dominant market share as a group, given Perodua’s present market-leading share of around 40% to 45% this year.
55 years in auto business
Sime Darby Motors has (in Malaysia) global brands such as BMW, MINI, Hyundai, Ford, Jaguar, Land Rover, Porsche, BYD and Volvo. It became involved in the auto business 55 years ago and in Malaysia, started with Ford (via PERNAS-Sime Darby in 1981).
The acquisition of UMW with its Toyota and Perodua brands would certainly enable Sime Darby to scale up and become a significant player in the Asia Pacific area, It would put an additional four vehicle production plants in its portfolio.
However, Dato’ Jeffri Salim Davidson, Group CEO of Sime Darby, has given assurance that the current operations will not be disrupted if the acquisition takes place. Presumably, UMW, being a well established organisation, will continue to operate as it is. It acquired the Toyota franchise in 1982 and then joined in establishing Perodua in 1993.
Tapping into Toyota’s ecosystem
Sime Darby does, however, see great benefits in being able to tap into a new brand ecosystem, ie that of Toyota. It sees access to this extensive ecosystem to be able to provide opportunities for collaboration, synergies and potential growth.
Ultimately, with the broadening of its earnings base and presence in other parts of the automotive value chain, Sime Darby believes it will be able to create resilience against changing retail models and market dynamics. The diversification of the group’s brand portfolio will also strengthen its competitive position and set the stage for sustained profitability.
One question that remains is how Toyota Motor Corporation views this development. While Sime Darby Motors has relationships with many other carmakers in the region, it has not had any connection with Toyota or its affiliates.
How UMW got Toyota in 1982
This is unlike the time when UMW made a bid for the Toyota franchise in the early 1980s and already had an established connection through being the distributor for Toyota forklifts. This made it easier for negotiations which were also helped by the fact that the Inchcape Group, which had been handling Toyota (via Borneo Motors) was planning on withdrawing from the Malaysian market after the New Economic Policy was implemented.
Toyota currently has a combined 49% share in UMW Toyota Motor, 10% of which is held by its subsidiary Toyota Tsusho Corporation. It obviously also has an indirect connection to Perodua as Daihatsu Motor (which is part of the Toyota Group) is a shareholder in the Malaysian carmaker.
Will Toyota follow UMW?
Therefore it will also remain to be seen whether Toyota is keen on teaming up with Sime Darby moving forward, or choose a different route. In the UMW Toyota Motor joint-venture, it has had substantial influence to guide developments and plans in sync with its regional plans. Moving under the Sime Darby umbrella may present different challenges in achieving its own goals.
But these are times of change and as we have seen, the government has been willing to make exceptions for Tesla to position Malaysia more prominently in its regional plans, so there may be other new developments as well.