By Khairie Hisyam
Eco World Development Group Berhad’s major shareholder, Eco World Development Sdn Bhd (EWDSB), has offered to sell properties in Sydney worth AUD$28 million (RM84.7 million) to the group for the same price and same terms EWDSB is buying it for.
In a regulatory filing today, Eco World said that according to EWDSB’s offer letter dated May 9 2014, the properties are located on a 1.18-acre land parcel in Sydney and had been earmarked for redevelopment into a mixed residential and commercial development.
EWDSB, which currently owns a 30.01% block in Eco World, had inked agreements on May 9, 2014 with the seller of the properties, Menara Parramatta Pty Limited, for the purchase through Eco World Sydney Development Pty Limited, a wholly owned unit of EWDSB’s wholly owned subsidiary Fortune Quest Group Limited.
The agreements signed were a contract of sale of the properties from Menara Parramatta for AUD$28 million; a development deed between EWDSB and Menara Parramatta whereby the latter will gain relevant authority approvals for redevelopment of the land; and a guarantee and indemnity by EWDSB in favour of Menara Parramatta to guarantee the performance by Eco World Sydney of its obligations under the contract of sale and development deed.
In its statement, Eco World said it is interested in exploring overseas expansion which includes Sydney as a desirable location. However it could not buy the Sydney properties in question directly as such an acquisition would require board approval and potentially shareholders’ approval.
“It is a key term of the contract of sale that the vendor (Menara Parramatta) requires the purchase price to be fully settled by 30 May 2014,” said Eco World. “As such, it is not possible for Eco World to acquire the property directly from the vendor within the time-frame stipulated.”
Having evaluated the land’s development prospects EWDSB feels it has good potential as a strong debut project for a new development name seeking to establish a foothold in Sydney, said Eco World’s statement, adding that with that evaluation EWDSB accordingly inked the agreements and will complete the sale by May 30, 2014.
“In line with the corporate exercise (announced April 25, 2014) and the intentions of EWDSB shareholders to undertake all future development activities through the company as a listed vehicle, EWDSB is prepared to make the offer to Eco World to enable the Company to acquire the property at the same price and on the same terms, subject to the approval of the company’s shareholders being obtained,” said Eco World in its statement this evening. “This will enable the group to benefit fully from the property’s development potential.”
On April 25, 2014 Eco World had announced several corporate exercises which include an assets injection, shares split and subscription, rights issue and private placements.
Among others EWDSB will inject assets with some RM30 billion in gross development value (GDV) into the company, more than tripling Eco World’s land bank from 1,326 acres to 4,433 acres and boosting the group’s current GDV from RM13.49 billion to RM43.53 billion.
As part of the injection, EWDSB’s shareholders — Eco World Development Holdings Sdn Bhd (Eco World Holdings) and Sinarmas Harta, which own 50% each — will subscribe to 806.85 million new Eco World shares worth RM1.37 billion to partially fund the acquisition by Eco World.
As at end-March, the directors of EWDSB are non-executive chairman Abdul Rashid Abdul Manaf, non-executive deputy chairman Leong Kok Wah and executive director Liew Tian Xiong.
However EWDSB intends to seek an exemption from the mandatory general offer requirement upon crossing the 33% threshold as Eco World Holdings, which will pass that figure after the exercises are completed, does not intend to undertake a take-over offer.
Board to deliberate, key directors to abstain
Eco World’s board will consider the offer at an upcoming meeting and take into consideration all relevant approvals needed as well as the company’s long-term business plans, said the company.
The offer from EWDSB is valid for a month subject to mutual extension from the date of the letter, said Eco World.
In relation to the offer a number of key figures in Eco World’s board are deemed interested and will therefore abstain from considering and voting on the offer — Abdul Rashid Abdul Manaf and Eddy Leong Kok Wah who are shareholders in EWDSB as well as new addition Liew Kee Sin and son Liew Tian Xiong since the latter is an EWDSB director.
Tian Xiong currently holds 35.05% in Eco World, although this is set to dilute to 11.27% after the corporate exercises announced on April 25, 2014 are completed. In turn Abdul Rashid and Leong is set to jointly hold 35.24% through Eco World Holdings while Leong will also own a separate 26.53% block through Sinarmas Harta.
Additionally Chang Khim Wah and Heah Kok Boon, being EWDSB directors, had also volunteered to abstain despite not holding shares in EWDSB in view of their relationship to both sides. Chang is Eco World chief executive officer while Heah is chief financial officer.
“Should the board approve the offer, the offer will be tabled for shareholders’ approval at an extraordinary general meeting (EGM) and the interested Directors and other directors will abstain from deliberating and voting on the offer at the EGM,” said Eco World.
KiniBiz previously examined Eco World’s rapid emergence in a three-part series here.
You must be logged in to post a comment.