KUALA LUMPUR (Aug 1): DRB-Hicom Bhd is disposing of its entire 97.37% shareholding in waste disposal management company Alam Flora Sdn Bhd to Malakoff Corp Bhd for RM944.61 million cash.
DRB-Hicom said the proposed disposal provides an opportunity for the group to unlock the value and monetise its investment in Alam Flora, which is expected to give rise to an estimated net gain on disposal of RM735.4 million.
As for Malakoff, it said the acquisition will enable it to expand its business and activities into environmental related services.
"With the country’s power generation sector becoming increasingly competitive and challenging, the acquisition of Alam Flora will hasten Malakoff’s expansion into environmental related business and [its] push into [the] renewable energy sector,” said Malakoff chief executive officer Datuk Ahmad Fuaad Kenali in a statement today.
Alam Flora holds a 22-year concession from the government to provide collection and public cleansing management services in Pahang, Kuala Lumpur and Putrajaya from Sept 1, 2011 to Sept 1, 2033. Additional revenue prospects may also come from the provision of solid waste management services for Kelantan and Terengganu.
For the financial year ended March 31, 2018 (FY18), Alam Flora contributed a net profit of RM99.4 million or 19.4% to DRB-Hicom's earnings. It also recorded a revenue of RM813 million in FY18, which accounted for 6.4% of DRB-Hicom's total revenue.
Through Alam Flora, Malakoff will also be able to partake in the increasingly important and growing non-concession environmental services sector, such as in the provision of integrated solid waste services, recycling and integrated facility management services, the statement noted.
At present, Alam Flora operates eight landfills, one transfer station, one leachate treatment plant and two incinerator plants.
In a filing with Bursa Malaysia, DRB-Hicom said its wholly-owned subsidiary Hicom Holdings Bhd had today entered into a conditional share sale agreement (SSA) with Malakoff's wholly-owned unit Tunas Pancar Sdn Bhd to sell its entire 74 million shares or a 97.37% stake in Alam Flora to Tunas Pancar.
DRB-Hicom said it intends to use half of the proceeds from the proposed disposal, to repay its Islamic medium term notes and borrowings. It intends to use the rest for investments in existing businesses and future investment opportunities to be identified.
"The group will use part of the proceeds to partly fund its 50.1%-subsidiary Proton Holdings Bhd’s capital expenditure for the development of new models as part of Proton’s turnaround plan.
"The group also intends to have additional funds readily available to capitalise on viable investment opportunities in the existing business sectors of [the] DRB-Hicom Group as and when they arise, to further develop and grow their businesses," the filing added.
Both DRB-Hicom and Malakoff share a common shareholder in Tan Sri Syed Mokhtar Al-Bukhary, who is an indirect major shareholder of DRB-Hicom via his 90% shareholding in Etika Strategi Sdn Bhd, which in turn holds a 55.92% stake in DRB-Hicom.
Syed Mokhtar is also an indirect major shareholder of MMC Corp Bhd, which is the largest shareholder of Malakoff.
At the same time, Datuk Ooi Teik Huat and Datuk Idris Abdullah @ Das Murthy are common directors of the two companies.
Meanwhile, the SSA is conditional upon approvals being obtained from non-interested shareholders of Malakoff and DRB-Hicom at their respective extraordinary general meetings that will be convened, as well as approvals from relevant authorities and financial institutions.
Barring unforeseen circumstances, the proposed disposal is expected to be completed by the first quarter of 2019.
DRB-Hicom shares closed up 2 sen or 0.9% at RM2.24 today, with 3.97 million shares done, bringing a market capitalisation of RM4.33 billion. Meanwhile, Malakoff shares settled at RM1.04, 7 sen or 7.22% higher from yesterday's closing, with 14.74 million shares done, valuing it at RM5.11 billion.