By Ying Xian Wong


Shares of Sime Darby Bhd. and UMW Holdings gained early Friday after Sime Darby proposed to acquire a majority stake in UWM.

Sime Darby's shares rose 4.7% to MYR2.21 while industrial group UMW's shares gained 3.9% to MYR4.80.

Sime Darby on Thursday offered to buy a 61.2% stake in UMW Holdings from Malaysia's government-linked asset manager Permodalan Nasional Bhd. for 3.57 billion ringgit ($768.6 million) or MYR5.00 a share.

Trading in both stocks was suspended Thursday afternoon pending the announcement.

Sime Darby has also proposed to launch a mandatory takeover offer to acquire all the remaining shareholding of 38.8% and take UMW private.

Sime Darby's chief executive Jeffri Salim Davidson said the deal was a tactical move to expand and strengthen the company's presence in the Malaysian automotive sector.

"The deal will cement Sime Darby's position as Malaysia's leading automotive player", Davidson said in a statement.

UMW is the largest shareholder in Perusahaan Otomobil Kedua (Perodua), a leading national automotive manufacturer and is also a distributor of Toyota in Malaysia.

Separately on Thursday, Sime Darby said its fiscal fourth-quarter net profit rose to MYR622 million from MYR278 million a year earlier, mainly driven by disposal gain of its motor segment's properties and dividend income.

Quarterly revenue rose 22% on year to MYR13.29 billion.

Kenanga Investment Bank said the acquisition could increase Sime Darby's FY 2025 earnings by 14% and increase its local automotive sector market to more than 50% from 3% at present. It raised Sime Darby's target price to MYR2.45 from MYR2.40 and maintained its outperform rating.

Citi said a positive share price reaction was expected given the potential strategic advantages of the merger and potential earnings per share accretion. Citi forecasts a 12% increase in Sime Darby's FY 2024 EPS after the 100% stake acquisition.

Citi has a buy rating and MYR2.50 target price on Sime Darby.


Write to Ying Xian Wong at yingxian.wong@wsj.com


(END) Dow Jones Newswires

08-24-23 2233ET