Sunday, October 11, 2015

AirAsia Going Private: An Economically Viable Move?

After its shares took a beating earlier this year, will the move for AirAsia to go private an economically viable one?

By: Ringo Bones
The founders of Asia’s number one budget carrier AirAsia Bhd are sounding out investors to take the company private in a managed buyout after its shares took a beating earlier in 2015 after a critical research report was published. AirAsia boss Tony Fernandes and his longtime business partner Kamarudin Meranun are working with banks to secure financing for the transaction which could be launched over the next few months said the people who did not want to be identified as the discussions were confidential. 

Obtaining financing will be the key for the deal to succeed, the people said. An AirAsia spokeswoman had no immediate comment when contacted by Reuters. AirAsia’s market value has fallen by 40-percent to 3.51 billion ringgit (803 million US dollars) since Hong Kong based GMT Research questioned AirAsia’s accounts in a report back in June 2015. Will AirAsia going private prove to be an economically viable move? Risks of managed buyouts include volatility of capital and could prove to be a financially costly move if the US Federal Reserve decides to increase the cost of borrowing money before the end of 2015. 

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