BAT Malaysia gets nod for land sale, working on restructuring plans

KUALA LUMPUR: British American Tobacco (Malaysia) Bhd (BAT Malaysia), which obtained shareholders’ approval for its proposed land sale at an EGM yesterday, is still working on its restructuring plans.
A minority shareholder who declined to be named said BAT Malaysia’s newly appointed managing director, Hendrik Stoel, had previously restructured British American Tobacco’s operations in Korea. He joined the Malaysian operations on June 1, 2016.
According to the shareholder, the management may look for a new office and warehouse but did not disclose the new location.
The group has at least a year to decide, as the land sale comes with a one-year leaseback and an option to extend it for up to another year.
He said the management will take a year to complete the land disposal and implement a redundancy exercise involving some 230 employees.
“The management didn’t say much about other issues. Shareholders were more concerned about the future of the company after the land disposal,” he said.
BAT Malaysia’s management declined to meet with the press after the EGM. However, in a statement issued later, it said that it remains committed to maintaining its market leadership in the Malaysian tobacco industry.
“Our shareholders have raised their concern on the high illegal cigarette incidence which will greatly impact the legal industry and we shared their concern.
“We have assured our shareholders that as an industry, we have raised this concern to the relevant authorities and appealed for an excise moratorium to stabilise the market. As you have heard many times, the legal industry is already at a tipping point,” Stoel said in the statement.
In June, the group entered into a conditional sale and purchase agreement with LGB Properties (M) Sdn Bhd for the sale of its land and properties in Virginia Park, Petaling Jaya, for RM218 million after a public tender exercise.
The proposed sale follows the group’s decision to restructure its business operations by sourcing tobacco products for the Malaysian market from other BAT Group factories regionally and cease its factory operations in Virginia Park.
“It is a tough time because the illegal market makes up more than 50% of the market and government tax (excise duty for tobacco) is very high. In addition, they cannot reduce prices,” said the shareholder.
“They are trying their best. It all depends on the new managing director’s strategy,” he added.
The land sale, which received 99.99% approval from shareholders at the EGM, is expected to be completed by year-end.
Of the RM218 million proceeds from the land disposal, RM55 million has been set aside for one-off restructuring expenses, including RM41 million for redundancy payments to the affected employees. About RM10 million has been allocated as expenses in relation to the proposed disposal and RM13 million for monthly rental for the one-year leaseback. The bulk of the proceeds, about RM139 million, will be paid out to shareholders as cash dividends.