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UPDATE: Malaysia's Proton Sells Augusta Stake For EUR1

KUALA LUMPUR (Dow Jones)--Proton Holdings Bhd. said Tuesday an Italian financial holding company has bought its entire stake in motorcycle maker MV Augusta SPA for a nominal EUR1.

The move will allow Malaysia's loss-making state-owned automaker to reduce its liabilities and refocus on its core activity of making cars after a yearlong investment in the Italian specialty motorcycle maker.

Proton sold its 57.8% stake in Augusta to Gevi SPA, which will assume Augusta's EUR106.9-million debt and EUR32.5-million working capital requirements, the Malaysian company said in a statement.

The sale was "consistent with Proton's direction of divesting non-core assets," the automaker said.

Proton rescued Augusta in 2004 by injecting EUR70 million into the maker of Cagiva, Agusta and Husqvarna brands of high-end motorcycles - a move that surprised many analysts.

The divestment will allow Proton to focus on making cars and returning to profit after losing MYR154.3 million ($40.8 million), partially because of MYR90 million in provisions for Augusta, in the quarter ended Sept. 30.

"This is a good move as it allows Proton to clean up its books," said an analyst at a Kuala Lumpur-based European bank who declined to be named.

Proton said the sale "is not expected to have any effect on earnings," echoing Chairman Azlan Hashim's remarks in November that no further provisions are likely.

Ahead of the market opening Tuesday, Proton suspended trade in its shares, which last traded at MYR6.15 and have sunk nearly 32% this year.
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