A few months ago I suggested that the Malaysian government was on the verge of offloading Group Lotus to billionaire Syed Mokhtar Al-Bukhary and a consortium of other businessmen, in a deal put together by Lotus F1 Team owner Gerard Lopez. Things then went quiet for three months, presumably as the deals were sorted out. The government has now announced that Syed Mokhtar’s DRB-Hicom is buying Proton, the national car business – which owns Lotus – from one of the government’s holding companies. This is being announced as part of the government’s plan to divest itself of some of its industrial businesses in order to make them more competitive, and boost the Malaysian economy accordingly.
It will be interesting to see whether or not this will have any effect on the ownership of Group Lotus, which is supporting the activities of Lotus F1 Racing in Formula 1 – which is why Lopez was involved. Syed Mokhtar is reported to have paid $410 million for control of the business – which is not a huge amount, although the government can justify the price as a successful deal, given the poor returns that Proton has been producing in recent times.
DRB-Hicom distributes and assembles vehicles for Volkswagen and Mercedes-Benz in Malaysia, but the deal means that he will now control the two Proton factories, which have the capacity to make a combined 350,000 vehicles per year. It seems that the delays in getting the deal sorted out came because Proton chairman Mohd Nadzmi Mohd Salleh was also busy trying to buy the government shares in the business.
Syed Mokhtar is not saying from where the money is coming, but it is possible that part of the plan is to sell Group Lotus to help finance the purchase of Proton and DRB-Hicom will then set about assembling more cars in Malaysia, while also trying to improve Proton’s sales and image. That would leave Lopez and whatever investors he can find to buy Lotus, or at least a significant share of it, which would allow him to be in a position to have a more stable relationship between the car company and the F1 team and – because he is an ambitious soul – the chance to build Group Lotus into a stronger company. Whether this will include Group Lotus’s current CEO Dany Bahar or not, remains to be seen.
joeblogsf1 
Joe,
Is there any chance of Tony Fernandes owning any shares in Lotus after the dust settles in this deal?
I think that TF is now concentrating his efforts on Caterham. The Lotus thing is long gone.
The gossip going round some other sites was that Caterham may acquire the rights to the Elise and the Exige. The thinking was that they were in the spirit of the Caterham ethos (and Lotus before Dany Bahar wanted to push upmarket). That may be as close as TF will get to Lotus now.
I beieve it was discussed, but last I heard it was not going to happen. However, I have not spoken to them in while.
Since Caterham has Tony Shute now… what would be the point in buying the rights to the 111 chassis? i suspect something “better” is in the works for Caterham.
I have to say that I see great opportunities for Group Lotus. Not so much in car sales per se, rather in spin off projects from its Motorsport arm.
Karen Brady of \west Ham was on Sky News today saying how they were bringing in young people to introduce them to the business of football. Journalism, business studies, Law, finance, sport science etc. You can add Engineering, Material technology, Aerodynamics plus plus to Motorsport.
I’m available if they need someone who has a plan.
John Mansfield
According to an interview on Speedtv.com with the head of Lotus’ Indycar engine program, Dany Bahar recently signed a four-year contract to continue as CEO at Lotus.
In F1 a contract is simply the starting point of a negotiation. If the new owners want change, then there will be change. I don’t know what they will do and I do not much care as Lotus’s real influence on the F1 team at the moment is minimal. Lopez runs the F1 team and I am sure he is behind this whole sale.
Contract terms and negotiation points aren’t exclusive to F1 – the whole sports and business world uses them in the same way.
However, the fact that Bahar has just signed a four year deal either means that the owners at Proton have total faith in him (and the new ownership deal was endorsed back in early December) – or they have been tucked up by a dealmaker. You decide….
Don’t get me wrong Joe, but most of this post is speculation. Isn’t it too early to pick on the topic when most of it is at the level of “may or may not happen”?
Best regards
That is what people said when I wrote the original story three months ago. They said it would never happen. It has happened.
Bahar seems relatively bullish about Lotus’ future in this month’s Evo magazine here in the UK. He also seems on good terms with Lopez as well, but it could all be balls of course 🙂
Without access to Proton funds, or more precisely Malaysian government money, how will Lotus Cars finance its huge planned expansion, let alone an F1 team (without free engines)?
Just a quick note Joe, in their filing to Malaysian Bursa, both parties noted that under new ownership, that current employee positions are safe for at least 12 months, DRB-Hicom will not table or support motions to remove senior management and that for the first 24 months of ownership, no existing assets or subsidiaries such as Lotus can be sold.
Shah66. According to the articles I have read that is correct.
If the plan is to unload Lotus it may be useful to just leave Bahaar in place as a pitch-man. He has a case full of figures and stats, what on the surface looks like a plan, and it would avoid the need for the new owners to get too involved, wasting time ‘replanning’ Lotus. They could just offload him with the package.
All of this of course hinges on Bahaars (and his figures) credibility, and that might be a problem. Unless the buyers are non-car people, and I’d put my money on that they will be.
Either way, Bahaar’s had the ride of his life and will leave with a few bob in his pocket, a couple more lines on the old CV and a position that he could argue was a success (or at least on the way to being one because it didn’t have time to fail!).
What price competence eh.
Such a shame for the people at Hethel, uncertainty is never easy to live with and Lotus seems to have had more than its fair share. I do hope Dany Bahar & chums get shown the door sooner rather than later. New ideas, change and development are good things but theirs just don’t fit.
This plot seems to go on on and I read this in my local press:
http://www.edp24.co.uk/business/hethel_engineering_centre_could_secure_3_77m_loan_from_norfolk_county_council_1_1178204
So Group Lotus or Dany bahar still appears to be able to raise money from local and central government. My issue here is some of that money is mine in the form of my local taxes and I’d rather see it used for more worthy projects.
Does anyone remember buying shares on margin account? Three days (used to be 5) to pay up, because technically the settlement couldn’t be done before. I reckon some of these very connected guys still play that.
My Barclays account is still on T+5. But that’s a normal acct not, on margin.
I have time to buy and sell before settlement, but the go strictly to the day, so a quick in and out has to be done on one day. (unless you are offsetting with a comodity that moves in reverse)
Interesting. Do they consider the share delivered on T+0 or T+5, the latter meaning you lent them the share to rehypo meanwhile? Doesn’t sound like their (really neat) Barx platform.
sorry guys for the tangent. I thought T+5 settlement went the way of the Dodo early 90s. But then I also thought that they had sussed BASEL II – the bank capital adequacy rules, which i watched congeal since I can remember. Boy, was that a shock to learn straight up, that it was a load of cobblers, about when Lehman went down. Rules, eh, designed to be forever debated and always circumnavigated . . cue the New Improved rules – sigh –
back to Lotus . . I broadly think this whole thing was TF calling out a fool who coveted something they couldn’t quite have and who was in a weak enough position to have to bet the farm on attaining the shiny object. Pick and choose your moral story! But if the plan all along was to bootstrap finance what is now Caterham F1, lots of brownie points from me. Might be the first team boss to make me grin!
Nadzmi Salleh already said that if he was succeed buying Proton, he will offload Group Lotus from Proton. For me, I think Proton should just kept Lotus Engineering and sell other.
It looks to me as if someone is about to loose a huge amount of money, that is unless part of the deal was to write off the gigantic debts that Group Lotus and Lotus Group International owe to both Proton and it’s/the government’s bank(s).
Since the arrival of Mr floppy blond hair at Hethel, those debts have rocketed and with Lotus cars now aligned to take on Porsche (LOL ROTG) in a few years when the tooling is completed the production smoothed and dealers found to accept millstones. Only then in maybe in 10-15 years with complete success, can the losses be made into profits and inroads be made into the debt mountain. Meanwhile it it just a commodity as it the race team.
Joe,
You’re in the money as we say. It was reported in detail today in the FT, just as you have stated above. As for the spinoff of the Lotus – UK car group, that is now pretty much in play, and you have called it correctly as to who the new owner will be. But I am afraid Joe, your best mate, the CEO will be handed his P45.
I am sure that he will go away with a healthy compensation payment. I think his days in F1 may now be over.
Will be handed his P45 or wont be handed his P45, Keith?
Let’s put it this way. The book is now closed on whether he will get a P45 or not. The only opening is when. Sorry I am not running the book, only passing on what is doing the rounds now.
But as Joe has mention many times, this is F1, and anything can happen, and usually does, but then again we are dealing with a car company on the far fringes of the F1 circus.
Proton never seemed to make the most of lotus – it should have enhanced the Proton name more than it has.
What, exactly, did Proton ever do for/with Lotus?
Absolutely stuff all.
I and a small group of 20 Lotus owners had lunch with Bahar last Spring.
He is a very persuasive talker that’s for sure and we left thinking the whole ‘Lotus goes upmarket’ thing might just work.
However even in such a short space of time since the world has changed.
He was quizzed on the Fernandes/Team Lotus debacle and replied..’ it is just a pis*ing contest’
I told Fernandes at the Caterham launch and he signed my TEAM LOTUS book accordingly !
Good call on the sale of the company Joe, do you know what happens to all the debt theta Group Lotus has accrued over the Bahar tenure? would that be a write off for the Malayan government (through the holding companies) or will the new owners of Proton/Lotus be on the hook for that?
Seems like a huge burden for a small car company, if Lotus is to stand on it’s own.
Lopez will buy the lot and will maintain Dany and his executive team in place to execute the relaunch plan – everything Dany has said they will do up to this point in the past 2 years, they have done. Proton will likely maintain minimal involvement through shares or otherwise owing to the Lotus Ethos City Car project for reduced fleet emisssions….Exciting times ahead for Lotus and Lotus F1 Team.
Joe, have you seen the detailed Lopez/Bahar articles in this months EVO magazine?
“This plot seems to go on on and I read this in my local press:
http://www.edp24.co.uk/business/hethel_engineering_centre_could_secure_3_77m_loan_from_norfolk_county_council_1_1178204
So Group Lotus or Dany bahar still appears to be able to raise money from local and central government. My issue here is some of that money is mine in the form of my local taxes and I’d rather see it used for more worthy projects.”
Graham – The Hethel Engineering Centre has absolutely nothing to with Group Lotus (save for the fact Lotus donated the land for it to be built on years ago) Lotus get no financial benefit from any investment in the facility.
I get that contracts can always be ripped up and compensation paid out so its not an issue perhaps. But what company (in the right frame of mind) hands someone a fresh 4 year contract in the midst of detailed negotiations to sell that company over to brand new owners. Especially considering Bahars original contract naturally finished in 2012 anyway, and quite clearly the first thing the new owners would reconsider is the CEOs position, Proton could have done nothing and the problem would have solved itself.
Instead Proton threw the kind of spanner in the works that scuppers deals like this totally normally, no new owner is going to appreciate having a guy around appointed by the last owner, with a brand new 4 year contract to pay off
so unless Bahar had some option in his original contract, that forced Proton into making that new deal, and that the new owners totally went along with which means its unlikely he’s going to be looking for new work soon, it just doesnt make sense, it doesnt have to perhaps, but I dont get the timing or length of the deal they gave him considering the circumstances and maybe Lopez will have some explaining to do
EXACTLY Clives! 🙂 Lopez will buy the lot and will maintain Dany and his executive team in place to execute the relaunch plan – Makes no sense otherwise owing to the points you outline in your post above. Everything Dany has said they will do up to this point in the past 2 years, they have done. Proton will likely maintain minimal involvement through shares or otherwise owing to the Lotus Ethos City Car project for reduced fleet emisssions….Exciting times ahead for Lotus and Lotus F1 Team.
Bahar also importantly/interestingly has equity in Lotus as was quoted in the recemt EVO Magazine piece.
Well, apart from dropping some of the projects announced.
Which projects have they dropped Joe? Only thing changed is the delay of the Elan to 2017 as they have extended the life-cycle of the current Evora which makes perfect sense. The Elan will then replace that car and depending on the Evoras success in the interim, could either be named Elan or Evora depending on the brand value the EVORA tag is able to build in the meantime. Lotus also yesterday announced details of their new London flagship store on Regent Street (incidentally same street Bahar and Kimi when at Ferrari launched the flagship Ferrari store) – Link below. People will inevitably scoff at the prices of things etc yet the thing is, there is a market for such items and high margins involved and so a valuable revenue stream for the company/team and gives more fans the opportunity to feel a part of the team. There will be a range….just like at the Ferrari store you can spend £500 on a pair of glasses or £20 on a stuffed teddy bear or team t-shit. Heck….even if you look at the standard merchandising offerings from ANY F1 team, be it Caterham, Virgin, Williams, you can still expect to pay £150+ for a team jacket etc – its the (unfortunate) market rate at the moment: Just as Ferrari Store (which is ALWAYS packed solid!), the Lotus store will inevitable offer such a ‘range’ – Another of Danys projects they said theyll do which they have done….. –
http://www.thelotusforums.com/latest-news/lotus-cars-news/lotus-to-open-shop-on-londons-regent-street/
We will see what happens.
I would imagine DRB-Hicom would have to make some type of announcement as to their plans with Lotus in the coming days/weeks to calm the nerves of the dealer network (globally) and for their sake, it better be positive or you will see dealers drop like flies which would ultimately put the proverbial “nail on the coffin” to Lotus Cars.
I’d feel better if an announcement was made that a major car manufacturer like VW, BMW, GM etc. is interested in buying Lotus as I believe this is the only way for Lotus Cars to stay in business and I don’t believe TF, Genii Capital or a Chinese company can make Lotus work.
Abe,
Lotus don’t have a dealer network at the moment. The existing contracts were ripped up & new ones offered which commit the dealers to spending large amounts on the dealerships, a la Porsche did years ago. The details are in the story in EVO magazine this month. Anyone interested in this whole saga should go out & buy it, at least to get Lotus’s spun version.
Actually, they do have a dealer network in North America China and the Middle East but my point, especially when speaking about the North American market, the laws are such that if a dealer wanted out of the Lotus business they can shove all of their unsold inventory back to Lotus including parts and tools and Lotus will have no choice but to buy back all of it. With roughly 52 dealers in North America, imagine what kind of financial hole that would but Lotus in. (hard to imagine seeing they are already in that sort of mess)
I don’t agree McLaren isn’t owned by another car maker and seems to be doing quite well, as long as the owner (or preferably owners) is well financed so they can take a mid to long term view then I don’t believe a volume car manufacturer would help Lotus.
There is still a large amount of over capacity in the volume car industry so expect more consolidation and possible a dramatic closure or two soon.
So many negative views based upon speculation.
Two years in, everythings going to plan (?). Keep the faith.
Everything is going to plan? Was the plan to sell it?
There is apparently a clause in the Proton sale contract saying the new owner can’t sell any divisions of the company for two years, and Lotus has announced today that the sale means nothing to the original plan.
However the recent EVO article said Mr Bahar is a shareholder, so its possible shares have already passed to Genii giving them a foothold and two years to raise the money to complete the deal???
Regarding the model range planned, it isn’t very different in some ways to what McLaren is allegedly planning with the exception of the Elise/Exige replacement, which could be quietly dropped if the larger cars are a success or replaced with a less ambitious trackcar like the current 2-Eleven.
As said above though we will see what develops……
Syed Mokhtar selling Bank Muamalat?
by Bernama on Tuesday, 17 January 2012 12:02
KUALA LUMPUR (Jan 17): Business tycoon Tan Sri Syed Mokhtar AlBukhary has to fork out over RM3 billion for the entire purchase of Proton Holdings Bhd, the national car maker.
Industry players are speculating on his moves to obtain the funds to finance the purchase.
Yesterday, Syed Mokhtar’s DRB-Hicom bought 42.7 per cent stake in Proton from Khazanah Nasional Bhd via a conditional sale at RM5.50 or RM1.29 billion cash.
Once the deal is completed, expected in two months, DRB-Hicom is obliged to undertake a general offer for the remaining Proton shares at the same price.
It will have to come up with another RM1.73 billion for the remaining 52.28 per cent comprising 314.48 million shares which are not owned by Khazanah.
With such huge amount of cash needed for Proton’s purchase, industry observers are saying the tycoon may be looking at a few alternatives, which could include borrowings from foreign banks.
Another alternative is to dispose his assets. Could he be looking at disposing Bank Muamalat?
With the third round of liberalisation expected in the banking industry soon, analysts said smaller banks would be merged to create large and strong banks.
Hence, it makes sense to dispose Bank Muamalat if the bank is not a large entity sooner or later, smaller banks would have to be sold anyway.
DRB-Hicom is the holding company of Bank Muamalat Bhd, controlling a 70 per cent stake, while state asset manager, Khazanah Nasional Bhd, owns the remaining 30 per cent.
Bank Muamalat started operations on Oct 1, 1999, with combined assets and liabilities brought over from the Islamic banking windows of the then Bank Bumiputra Malaysia Bhd, Bank of Commerce (M) Bhd and BBMB Kewangan.
Last year, Bank Muamalat submitted a letter of expression of interest to BIMB Holdings Bhd (BIMB) to explore a potential merger with Bank Islam Malaysia Bhd but was rejected by the board of the latter. – Bernama
It looks like DRB Hicom see synergy with Proton/Lotus. I would be interested to see where this goes.
This article supports my feelings on this. DRB Hicom are education initiative friendly.
http://biz.thestar.com.my/news/story.asp?file=/2012/1/17/business/20120117154021&sec=business
The International College of Automotive (ICAM) established by DRB-Hicom can provide one of the best synergies and perhaps be the golden key to Proton’s core competence to unlock the future for Proton, he said.
“ICAM, the only local centre of education that offers automotive courses covering both upstream as well as downstream of the total automotive value chain, also prides itself with a unique holistic teaching approach enlisting teaching personnel who are also industry professionals,” he said.