Malaysia's DRB-Hicom Open To Selling Lotus

The conglomerate said it was in talks with its foreign partners on possible tie-ups to revive the loss-making British carmaker.

KUALA LUMPUR, Malaysia (AP) — Malaysian conglomerate DRB-Hicom Berhad said Wednesday it was keeping its options open about selling loss-making British sports carmaker Lotus after buying its parent Proton.

DRB-Hicom, which distributes and assembles for Volkswagen, Mercedes-Benz and Honda, also said it was in talks with its foreign partners on possible tie-ups to revive the national carmaker but ruled out selling a stake in Proton.

Managing Director Mohamad Khamil Jamil said DRB-Hicom would conduct due diligence on Lotus before making a decision. Proton bought Lotus in 1996 to bolster its technological know-how but losses at Lotus have weighed on the company.

"It has been there for years and has done some good things," he said. "We need to sit down with Lotusmanagement and look at their plans before arriving at a definitive decision."

DRB-Hicom announced Monday a 3 billion ringgit ($962 million) deal to take over Proton, a move analysts said would boost the struggling carmaker but losses at Lotus would require a hefty cash injection that could hamper a turnaround.

Proton last year said it hopes to revive Lotus in five years as a premium sports carmaker comparable to Ferrari and Lamborghini.

It also said it would jointly develop a sports city car with Lotus for the global market. Last year, Proton entered Formula One racing as the chief sponsor for Renault to help Lotus strengthen its hand in the luxury market.

"Lotus is still relevant in the longer-term picture for Proton. There is strong demand in China for Lotus cars but Proton has to tone down on capital expenditure for Lotus," said Ahmad Maghfur, analyst with OSK Research.

Mohamad Khamil said he would meet with Proton's management soon to discuss growth plans including restructuring the vendor supply chain, reviving Proton's brand name and ramping up exports, especially to Southeast Asian markets.

He said DRB-Hicom was in exploratory talks with its foreign partners about possible tie-ups that could help Proton tap the global market, but this would not involve any equity sale.

"Our long-term plan is to ensure Proton remains a heritage, a national car company but we have to fortify the brand," he said. "There will be alliances, collaborations and joint ventures with our foreign strategic partners to create a platform for Proton to venture into the global arena."

Under the deal, DRB-Hicom will pay 1.29 billion ringgit ($414 million) for government investment arm Khazanah Nasional's 43 percent stake in Proton. It will then make an offer for all Proton shares it doesn't own at 5.50 ringgit ($1.80) a share, that would bring the total deal to around 3 billion ringgit.

Once the king of the road, Proton's fortunes have dwindled, with its market share falling to around 30 percent, from more than two-thirds just over five years ago due to greater competition as Malaysia liberalized its auto market.

Proton has failed in recent years to seal tie-ups with foreign carmakers, including Volkswagen, due to the government's insistence on maintaining control over the carmaker. DRB-Hicom, controlled by billionaire tycoon Syed Mokhtar Al-Bukhary, is also involved in banking, services and property sectors.

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