Assignment 2 ACC2222 (Group 5_Section 3)

By sitinurdiniehussin | Updated: Dec. 1, 2024, 3:09 a.m.

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YTL Cement Bhd 
& 
LaFarge Malaysia Bhd
Acquisition of
Group 5 (Section 3)
START
COMPANY
BACKGROUND
Subsidiaries of YTL Corporation
• Oldest & largest cement company in Malaysia
Known for top-notch quality products
Performance great - Revenue increases every year
Acquirer Background
Same industry as YTL Cement Bhd (specialize in cement, construction aggregate & concrete)
• Now known as Malayan Cement Berhad 
Still use same integrated cement plants even after acquisition
After acquisition - have more than 70 types ready- mixed concrete
Target Background
START
STRATEGY
LONG-TERM
Efficiencies Increase
(logistic, distribution and procurement)
Expand production capacity
Gain full excess to plants & facilities
Cut out excess capacity
Offer cement products at full range
Maximise Economies of Scale
Develop Research & Development (R&D)
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START
& BID
VALUATION
Profound effect on company's growth prospects & long-term outlook
Corporate Merger or Acquisiton (M&A)
Through acquisition, there was significant degree of risk involved
Affect company in number of ways  :- 
Capital structure Stock priceFuture growth prospects
PROS and CONS
1
Lead to growth of company
2
Encourage competition of company
1
Lead to integration risk
2
Overpayment
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START
TACTICS
DEFENSE
DEFENSE TACTICS:
KNIGHT WHITE
STAKEHOLDER ENGAGEMENT
POISON PILL
•  LaFarge issue new shares to its current shareholders at a reduced price
• to decreased the value of YTL's share
• Target effective as it stop YTL from gaining control of LaFarge
• consented to buy from YTL for higher price than what YTL was willing to pay.
POISON PILL
KNIGHT WHITE
• Cement Industries of Malaysia Berhad (CIMA) as white knight
• informed staff of the takeover proposal and the company's defense strategies. 
• invited customer to a meeting and spoke to supplier.
these tactics help in gaining support in order to prevent YTL from advancing its takeover attempt.
STAKEHOLDER ENGAGEMENT
There are the defense tactics used by LaFarge to prevent from hostile takeover by YTL in 2010 before YTL successfully acquired on May 3, 2019.     
YTL do involve in controversial projects , one of the is Penang Bridge Project.
This gives concern to LBM that YTL might not give efficient way in future projecs
Concern about the track record of YTL's performances. 
Lafarge's concern in YTL takeover impact  
This gives aware to the shareholder that YTL may cut job of LMB's employee. 
Concern about the impact of employee's future job
YTL had a history of laying off employees after the takeover of the company
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START
IMPACTS
ACQUISITION
improved operational efficiency, cost savings, and increased competitiveness in the market.

Economies of scale,Enhance its distribution network and streamline its procurement processes
 With the acquisition, LaFarge Cement became the largest cement manufacturer in Malaysia
IMPACT ON LAFARGE CEMENT
In FY2022, its pre-tax profit continued to grow, reaching RM129.2 million
The acquisition and subsequent consolidation of debts resulted in increased total borrowings for Lafarge Cement,
 Standing at RM3.7 billion as of June 22, 2022 compared to RM719.9 million in the previous corresponding year (FY2021).
Despite taking on a higher debt load as a result of the acquisition, LaFarge Cement maintains a still-healthy balance sheet. 
The parent-subsidiary link between LaFarge Cement and YTL Corp provides financial flexibility.

Creating bond issuance. 
Investors are encouraged to consider LaFarge Cement's new 3-year bond issuance, which offers an initial yield guidance around 5.4%
This link allows the company to leverage the resources and relationships of its parent company, which helps mitigate any weaknesses in liquidity and debt coverages.
That's all from us
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Assignment 2 ACC2222 (Group 5_Section 3)

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