DRB-HICOM and Volkswagen to control Proton ???

PETALING JAYA: DRB-HICOM Bhd's bid for control over Proton Holdings Bhd is likely to include the presence of Volkswagen AG at a later stage, a reliable source said.

DRB-HICOM's plan is to first secure a controlling block in Proton.

But at a later stage or second phase of the deal, DRB would divest some of its equity to Volkswagen, resulting in both parties sharing control and management in Proton, the source said.

Such a structure could make the deal more desirable, considering that it moved away from the prospects of Proton falling into the hands of a foreign party, an issue which was likely to have been part of the reasons why previous attempts by Volkswagen to buy into Proton were scuttled.

Volkswagen declined to comment while DRB-HICOM could not be reached for comment.

The market is rife with speculation that Khazanah Nasional Bhd has received a number of bids for a controlling stake in Proton. Khazanah owns 42.7% in Proton.

Another source close to the matter said Khazanah had yet to make a decision on the Proton deal and that meetings would be held this week between key stakeholders to discuss the matter.

The source also said there was a possibility that the sale of the stake in Proton might be called off temporarily.

“Whatever the case, there is likely to be more clarity within the next few weeks on whether a deal is going to take place,” said the source.

Khazanah was in negotiations with Volkswagen AG, but the talks broke down in late 2007.

DRB-HICOM had previously approached Proton in 2009 and formally submitted a bid to buy 32% of Proton shares.

After the talks with Proton broke down, Volkswagen partnered instead with DRB-HICOM in late 2010 to assemble and manufacture Volkswagen vehicles in Malaysia.

Proton shares have been actively traded in recent days on speculation that Khazanah was poised to divest its stake inthe national carmaker.

Some insiders reckoned that bidders might only be interested to own less than 33% stake in Proton, which meant that minority shareholders would not get bought out in the deal.

Volkswagen's involvement in Proton may also make DRB-HICOM's deal more attractive, considering that analysts have stated that what Proton needed was a partnership with an established auto manufacturer with technological capabilities.