Sunday, September 15, 2013

CCB - dividend payment

The amendment of a JV by CCB with principal Daimler AG in relation to an unconditional fixed annual dividend payment could further affect the former’s sluggish performance.

What is seen as a consistent annual dividend income for CCB will have an element of uncertainty now (Sept 2013) that it is no longer fixed following the announcement on July 24 2013.

The reversion to the JV is due to the fact that the unconditional nature of the dividend did not truly reflect the equity nature of the Daimler and CCB partnership in the JV.

About the equity nature of the JV, why is CCB not being paid annual dividends commensurate with its 49% stake in Mercedes Benz that could be five times more than I being enjoyed currently (Sept 2013).

In 2003, CCB subscribed for a 49% stake in Mercedes Benz while Daimler took 51% stake in the JV set up to take over the new wholesale and distribution role from CCB. Daimler had granted certain distributor rights to CCB, under an agency agreement on Oct 30 1974.

This JV effectively relegated CCB’s function to that of retailer of Mercedes Benz vehicles and it saw a downward spiral of its business, as it had previously lost other distribution rights.

It undertook a major restructuring exercise, largely complete by June 2008, which enabled the company to streamline its business portfolio and focus on its Mercedes Benz business.

Minority shareholders who have previously enjoyed bumper dividends, are believed to prefer that CCB cash out its JV and return the cash as dividends to shareholders. Alternatively they are also hoping for CCB’s 59.1% shareholder, Jardine Cycle & Carriage Ltd to take the company private. The other major shareholder of CCB is EPF with a 6.6% stake.

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