A Bailout In Malaysia: The Deal Smelled Rotten And It Was

UEM's rescue of Renong may have mostly benefited insiders

It looked fishy from the beginning. When United Engineers Malaysia (UEM) announced in November it was paying $671 million for a 33% stake in Renong, its troubled parent, UEM shares immediately plunged by 54%. Analysts figured the deal was aimed at bailing out Renong's politically connected stockholders. Why else, they asked, would a relatively healthy builder of highways buy a stake in a floundering and heavily indebted holding company--in the midst of Asia's financial meltdown?

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