Puncak, Gamuda Slide on Possible Water Bid Rejection

By Chan Tien Hin

Feb. 16 (Bloomberg) -- Puncak Niaga Holdings Bhd. and Gamuda Bhd. tumbled in Kuala Lumpur trading on concern the Selangor state government’s 5.2 billion ringgit ($1.4 billion) bid for their water assets was too low.

Shares of Puncak dropped 7.4 percent to 2.89 ringgit at 10:58 a.m. in Kuala Lumpur trading, set for the biggest decline since Oct. 23. It’s the worst performer on the benchmark Composite Index, which fell 0.4 percent. Gamuda slid 5.2 percent to 1.99 ringgit, the second-biggest decliner.

The Malaysian state government offered 3.1 billion ringgit for water assets that Puncak owns and 2.06 billion ringgit for Gamuda Bhd.’s facilities, the two companies said on Feb. 13. Maybank Investment Bank Bhd. said in a report today Puncak and Gamuda may reject the bids because they don’t adequately compensate for the loss of future earnings.

“We think the offers are unlikely to be accepted,” said Vincent Khoo, an analyst at Maybank Investment. “The saga could be long-drawn as all parties are likely to return to the negotiation table again.”

A rejection of the bids may delay efforts by the country’s richest state to take over the assets and operations of water companies in March and revamp the industry to prevent water shortages. The state government offered to take over the water assets without assuming any liabilities and the companies must respond to the offer by Feb. 20.

Water Shortages

Puncak ChairmanRozali Ismail couldn’t immediately comment as he was preparing to leave the office, his secretary said. Vincent Lim, a spokesman for Gamuda, was unable to comment. Lin Yun Ling, Gamuda’s managing director, didn’t immediately reply to an e-mail seeking comment.

Selangor may face water shortages by 2014 unless it restructures the “inefficient, fragmented” industry, Chief Minister Khalid Ibrahim said last month. The state government would be able to upgrade services without increasing prices should all four companies accept the offer, the government said in a separate statement on Feb. 11.

Malaysia needs to spend as much as 50 billion ringgit over the next three decades to upgrade aging infrastructure and improve services, according to the government. Under a national reorganization plan, the government plans to buy all the water assets in Peninsular Malaysia.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net; Angus Whitley in Kuala Lumpur at awhitley1@bloomberg.net