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DRB-HICOM conducts due diligence on Lotus
Business Times - 04/04/2012
DRB-HICOM Bhd, the ultimate owner of Proton Holdings Bhd, has hired two top-notch forensic teams to conduct a due diligence on Lotus Group International Ltd.
Lotus, the British sportscar maker owned by Proton, has been a major strain to the national carmaker’s cashflow over the years.
Business Times understands that separate teams from Ernst & Young (EY) and a unit from the influential Rothschild Group have been given the mandate to evaluate Lotus and its management team.
EY is one of the “Big Four” accounting firms,along with Deloitte, KPMG and Pricewaterhouse-Coopers, while Rothschild is one of the world’s largest independent financial advisory firms.
Hiring the top firms, especially Rothschild, to help in the due diligence is the clearest indication yet on the seriousness to resolve the Lotus quagmire.
Affin Investment Bank said in a September 2011 report that Lotus was expected to continue bleeding red ink at least until 2014.
Proton gained control of Lotus in 1996 from the liquidators of Bugatti Automobili SpA.
The national carmaker has not made any profit from the British unit over the past 15 years, which has been struggling to compete against other sportscar makers such as Porsche AG and Ferrari SpA in Europe.
Lotus has promised much and delivered very little to the bottom line of Proton. In 2010, Proton sought to turn around Lotus
with a five-year business transformation plan that would potentially cost up to RM2.37 billion, a feat that has since been a drag on the company’s earnings.
There has also been talks in the market of a consortium of local banks, which includes CIMB Bank Bhd and Malayan Banking Bhd,
having stopped lending money to Lotus due to its management’s inability to meet certain conditions in their loan agreements.
Thus far, the bankers have advanced Lotus as much as £200 million (RM976 million). It is understood that the decision to send in the two forensic teams was made last month after Proton’s management and Lotus’ top management team from Norwich were summoned to Kuala Lumpur to brief the new owner of Proton on what is happening in the company.
It is understood that the forensic teams, which have been stationed at the Lotus office in Norwich since late last month, will take at least six weeks to complete their task.
Based on their findings, a decision will be made on whether to pump in more money into Lotus or to sell the British carmaker.
If they were to sell the sportscar maker, it will be the second time in six years that Proton has sold an European asset.
In 2006, Proton sold a 57.7 per cent stake in motorcycle company, MV Agusta SpA, for a mere ?1 (RM4), after having splashed ?70 million (RM284 million) two years earlier to acquire the stake.
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