Malaysia's state investment arm Khazanah Nasional said on Monday it had sold its 42.7 percent stake in struggling national automaker Proton to leading car distributor and importer DRB-HICOM.
The buyer must also offer to purchase the remaining Proton shares from other stakeholders, which could push the deal to as much as 3.02 billion ringgit, said Ahmad Maghfur Usman, a Kuala Lumpur-based analyst with OSK Research.
Khazanah's managing director Azman Mokhtar said in a statement announcing the deal that the new Malaysian shareholder "will be able to bring Proton to the next level of strategic growth."
"DRB-HICOM?s proposed strategy and business plan provides an effective platform to enhance Proton's sustainability and meet its long-term growth needs," he said.
DRB-HICOM currently assembles Volkswagen vehicles at its facility in central Pahang state.
The deal could let Volkswagen use Proton's severely under-utilised plant in Perak state, limiting Proton's costs at the facility, the analyst said.
It may also help Volkswagen use Malaysia as a manufacturing springboard into the growing Southeast Asian market, where the German auto giant has traditionally lagged, he said.
"It may also lead to a (technology) tie-up between the two carmakers," he added.
Proton was launched in the 1980s as part of a national industrialisation push but has laboured under an image of poor-quality and unimaginative models and has struggled to compete with imports.
The carmaker has struggled to stay in the black and warned last year of a challenging outlook amid uncertainties in the global auto industry.
Khazanah had previously said that Proton needed a strategic partner to raise its competitiveness and penetrate global markets.
Ahmad said separate negotiations to sell the Proton stake to Volkswagen and General Motors fell apart in 2007 due to the Malaysian government's desire to keep the company domestically-owned.
Ahmad said Proton's two other major shareholders are the country's Employees' Provident Fund and national oil giant Petronas, which each have about 10 percent of the carmaker. Small minority shareholders make up the rest.
Source: AFP Asian Edition