The Board of Directors of Malco Berhad (Malco) has approved a deal to acquire the whole stake in Beta Berhad (Beta) for RM2.6 billion. Beta is controlled by the family of Malco's Founder, Ananda.

Beta has a well-established tele-communications business and has many lucrative foreign contracts. Due to the many lucrative foreign contracts, Beta has been very highly valued in 2015 revenues. Some analysts are of the opinion that this is an over- valuation of the company. However, through the acquisition, the two companies are expected to benefit from the combined balance sheet size, which would not only help them to raise funds for their ongoing projects but also bid for bigger projects.

If approved by the shareholder, the cost of the acquisition is expected to exhaust all of Malco's cash surplus. The Ananda family members involved in Beta declared that as a result of the acquisition they would probably net RM570 million from the ensuing capital gain.

Malco has called for an extraordinary general meeting to deliberate and if thought fit approve the acquisition of Beta.

Explain why agency problems are not a serious concern in private companies compared to public companies. (8 marks)

The Institutional Shareholders and the minority shareholders of Malco Berhad are skeptical of the proposal as they share the opinion of some of the business analysts that Beta Berhad is over-valued. The minority shareholders are willing to take the matter to court if they are not able to block resolution to acquire Beta Berhad during the EGM.

If you were the company secretary of Malco Berhad, discuss how you will advise the Board of Malco to overcome agency cost issues in the company particularly as a result of conflict between the shareholders and the Company?