It seems Proton wants to dump Lotus - but can they?

Can Proton actually sell Lotus?

The rumours continue to circulate that Proton wants to divest itself of Lotus. But under the terms of the DRB-Hicom deal, can they?

After DRB-Hicom bought Proton – owners of Lotus – from the Malaysian government in January, there’s been much speculation about the future of Lotus and Dany Bahar’s grandiose plans to turn Lotus in to a cross between Ferrari and Aston Martin.

The rumours have grown in recent weeks that Proton are looking to dispose of Lotus after they instigated an independent review of the Lotus setup and the Lotus F1 team ended a sponsorship deal with Group Lotus.

We’ve even had rumours that China’s Youngman is in the frame to buy Lotus from Proton – Youngman have been importing Lotus in to China for years – especially as they’ve failed to grab Saab from the liquidators.

To cap all the rumours with a nice little cherry on top, Lotus boss Dany Bahar is on holiday this week and not available to answer queries. So the rumour mill is now convinced Proton are about to divest itself of Lotus. But can they?

When the Proton deal was revealed back in January we reported that one of the caveats for the sale was that DRB-Hicom would not be able to divest itself of Proton assets for two years, which we assumed meant Lotus was tied to Proton until at least 2014. Which could be a bonus if Proton invest in Lotus but a minus if they choose not to.

With all the rumours running around we’ve revisited the document we had when the DRB-Hicom Proton deal was revealed and it says:

Company’s post-completion covenants and undertakings
The Company’s post-completion covenants and undertakings are, amongstothers, the following:
(ii) Within two (2) years from the Completion Date, the Company shallnot carry out any dealing with any Proton Shares, including anyattempt to deal or take any steps for the purpose of dealing but shallnot include any dealing in the nature of giving of security relating toany financing arrangement to be entered into by the Company for theProposals or to propose in any way any contract, arrangement or commitment to dispose of the assets of Proton (or any of its groupcompanies) which will result in a significant change in the businessdirection or policy of Proton which includes the manufacture,assembly and sales of motor vehicles and related products, or constitutes a Major Disposal (as defined under the Main MarketListing Requirements of Bursa Securities)

(iii) During the period of one (1) year from the Completion Date, not to,through any board or shareholders’ meeting, propose or vote infavour of any plans which may result in the dismissal, discharge,retrenchment or lay-off of the employees of Proton and/or itssubsidiaries (including by way of any voluntary separation scheme)other than on bona fide grounds of misconduct, retirement in theordinary course, the expiry of term of employment and/or mutualagreement between the relevant employer and employee;

Which seems quite clear, although we’re not lawyers. Perhaps if you are you’d like to pass an opinion?