Tenaga to bid for all the power assets of 1MDB

From the Edge:

Maintain add with an unchanged target price (TP) of RM15.27: TNB and several local and foreign companies have separately submitted non-binding offers to acquire 1Malaysia Development Bhd’s (1MDB) power assets.

Crucial information, such as the proposed acquisition price and earnings impact, was not disclosed. However, TNB believes that 1MDB’s assets are strong fits for its growth strategy, and stressed that any transaction needs to be value accretive. 

We believe the proposed acquisition, if it proceeds, will likely be neutral to slightly negative to TNB’s valuation in the near term. The acquisition could be negative because 1MDB acquired its power assets for RM18 billion (includes RM6 billion inherited debt) but has since written down about RM1.18 billion of acquisition-related goodwill. 

The transaction could be perceived negatively if TNB’s bidding price implies an enterprise value of more than RM16.82 billion. We think it will have a neutral impact if TNB pays a fair price for the assets. 

 Here is what I don't exactly like about the plan.  Call me skeptical but why is 1MDB insistent that it has many suitors for the power assets, yet it most probably would choose Tenaga.  It looks like a scene from a bad drama.

In the interest of investors and the general public, it would be good for 1MDB not to sell these assets to Tenaga, especially at this price.  No one knows how much the other bidders are paying or if these bidders are fake bidders, knowing the end game will be to sell to Tenaga.  It is stated in the press that many of these power assets were bought at high prices compared to what they would be worth on the open market.

There is a reason why 1MDB cannot IPO these assets.  Since the reasons are not divulged, one possible reason is that the IPO price is way below what the assets are worth on the balance sheet.  The loss would be too much for 1MDB to bear politically and much easier to dump it on Tenaga as they would carry it as a asset on their balance sheet.  If there is a write down, it won't come till long after.

Think twice Tenaga.  Make a smart bid buy taking into account how much they were worth when 1MDB purchased the assets, not how much they bought the assets for.