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PETALING JAYA: UEM Sunrise Bhd
and Eco World Development Group Bhd will participate in merger talks to create the country’s largest real estate company to be controlled by Khazanah Nasional Bhd.
The exercise, if approved by shareholders, will be carried out through a share swap that would see Khazanah Nasional control the expanded group with a 43% stake.
The deal would allow UEM Sunrise, the largest landowner in Iskandar Malaysia, to partner with a company that in six years has grown its business in Iskandar Malaysia to RM6.8 billion in sales across four municipalities and three business parks. .
Eco World Development’s projects in the Klang Valley will also help balance the group’s overall development in two of the country’s largest real estate markets and also internationally in Australia and the UK.
Eco World had combined sales of RM33.9bil in three countries with RM20.5bil in Malaysia and RM13.4bil in Australia and the United Kingdom.
Eco World International, which is dedicated to developing properties in the UK and Australia, will not be part of the merger and will remain a 27% subsidiary of the expanded group if the merger is approved by shareholders of both companies. “In addition to unlocking the value of the vast UEM land bank in Iskandar Malaysia, the complementary strengths, capabilities and geographic reach of both entities will establish a strong platform for future growth that would benefit all stakeholders,” said a source.
Merger negotiations emerged last year but ran into obstacles that brought any potential deal to a halt. One of the sticking points was that Tan Sri Liew Kee Sin, the majority shareholder of Eco World Development, would take control of the expanded group.
That would not be the case as Khazanah Nasional would retain the largest block of shares in the expanded group at 43% and Liew’s stake is expected to drop to just over 8%.
What Khazanah would receive from the deal is the ability to harness the entrepreneurial skills of a businessman who has built two real estate giants, SP Setia Bhd and the Eco World group, for his benefit in developing his vast tracts of land in Iskandar Malaysia.
Malaysian real estate companies have been hit by a multi-year real estate recession that has caused real estate companies to trade at a steep discount to their net tangible asset values.
“There is clearly a lack of investor interest in real estate stocks given the situation and a merger may spark interest in stocks that are trading at a large discount,” the source said.
The merger would allow both UEM Sunrise and Eco World Development to not only leverage the assets of both companies, but also the finances of each company in an expanded group.
The merger of UEM Sunrise and Eco World Development would see an enlarged company benefit from UEM Sunrise’s balance sheet with land available for development in Iskandar Malaysia and also the unbilled sales of Eco World Development.
The large land bank in Iskandar Malaysia would also enable the expanded group to tap into the demand for homes on land for the M40 group. Eco World Development was preparing to launch Eco Botanic 2 with the Johor State Government and the Iskandar Board of Investment, which would feature homes priced between RM500,000 and RM800,000 where there has been good reception from the buying public.
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