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DRB-HICOM to be suspended from trading today

DRB-Hicom Bhd’s shares will be suspended from trading today, pending a material announcement pertaining to Proton Holdings Bhd’s partnership with China’s Zhejiang Geely Holding Group Co.
DRB-Hicom, the parent company of Proton, will formally seal the partnership by signing a definitive agreement with Geely on Friday morning.
A company spokesperson told reporter that the trading suspension on DRB-Hicom would be in effect for two days from today.
At the end of last month, DRB-Hicom had signed a heads of agreement (HoA) with Geely for the sale of a 49.9% stake in Proton at an undisclosed price.
Under the earlier agreement, the price that Geely would pay for the stake in Proton had not yet been finalised.
It is likely that these pricing terms would be made known on Friday when the definitive agreement is signed.
The agreement would also see Geely buying a 51% stake in British sports carmaker Lotus from Proton for £51mil (RM284mil).
The remaining 49% stake in Lotus will be taken up by Etika Automotive Sdn Bhd.
Meanwhile, it was reported earlier that the entry of a major Chinese carmaker into Proton would bring fresh capacity to the group’s under-utilised factories and ease some of its financial woes.
Geely also plans to turn Malaysia into its global hub to manufacture all of its right hand-drive cars, including for the Volvo brand.
The China-based company will take a leadership role in production, sales and marketing.
Proton, meanwhile, will be responsible for the distribution of the brand in Malaysia.
Geely will also focus on assisting Proton in selling 500,000 cars in Malaysia and around the region by 2020.
It will also contribute technology, talent and money to Proton.
These include platform-sharing that would see the development of Proton’s first-ever SUV model from Geely’s best-selling model – the Boyue.
The changes at the shareholding level will still see Proton maintaining its national car status, earlier reports said.
This means that Proton’s industrial linkages, including vendors and dealers, will not be affected by this change at the shareholding level.
In an earlier report, RHB Research said the deal between Geely and Proton was a “win-win” for both companies.
Through the partnership, RHB said Geely would be expediting its growth in the Asean market noting also that this company brings a strong suite of production expertise, best practices, ready-made models to leverage off in the short term, including an effective distribution and after-sales business model.
Kenanga Research, however, is cautious on DRB-Hicom on this latest development adding that the outlook for the company remains challenging due to the tough operating environment of lower sales of motor vehicles with the stiff competition.
DRB-Hicom’s shares saw brisk trading last month on the day after it signed the HoA with Geely.
Almost 71 million DRB-Hicom shares, valued at RM124mil, changed hands on May 25 in what was its busiest trading day in at least five years.
Shares of DRB-Hicom closed two sen lower to RM1.75 yesterday, giving it a market capitalisation of RM3.4bil.

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