KUALA LUMPUR (Aug 9): Gamuda Bhd and Kumpulan Perangsang Selangor Bhd (KPS) announced today that they have resolved to accept the State government’s offer for Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH), confirming a report by The Edge Financial Daily published on Aug 6.

In a filing with the stock exchange today, both companies said Pengurusan Air Selangor Sdn Bhd (Air Selangor) and SPLASH are expected to finalise the terms and conditions of the share purchase agreement (SPA) by Sept 14, 2018.

“SPLASH Holdings (Syarikah Pengeluar Air Sungai Selangor Holdings Bhd is the parent of SPLASH) expects to commence negotiations with Air Selangor to finalise the terms and conditions for the sale and purchase of SPLASH, through a SPA to be executed by Air Selangor and SPLASH Holdings,” read the filings.

SPLASH is the concession holder of the Sungai Selangor Water Supply Scheme Phase 1 and 3, which controls about 45% of the treated water supply in Selangor, Kuala Lumpur and Putrajaya.

Last Friday, newly appointed Selangor Menteri Besar Amirudin Shari announced that Air Selangor has offered to buyout SPLASH’s water treatment assets at RM2.55 billion. The acceptance of the offer was said to mark an end to the water impasse in Selangor that started over a decade ago.

Based on the offer, Air Selangor will make an upfront payment of RM1.9 billion upon the signing of the definitive agreement with the remaining RM650 million being paid in instalments over a period of nine years.

The offer, which would have lapsed tomorrow, was at a 28% discount to SPLASH’s net book value of RM3.54 billion, as of end-June, according to Amirudin.

Gamuda owns 40% in SPLASH, while state-owned KPS, and Sweet Water SPV Sdn Bhd, a private vehicle of businessman Tan Sri Wan Azmi Wan Hamzah, each owns a 30% stake.

Gamuda is also currently serving as the operation and maintenance (O&M) contractor for the SSP3 Water Treatment Plant, which is managed by SPLASH. The divestment is expected to earn Gamuda an instant cash payment of RM760 million.  

Sources said earlier that Gamuda’s 80%-owned unit Gamuda Water Sdn Bhd would also continue to be the O&M contractor, but with renegotiated contract terms between the company and the state government.

However, its shares took a tumble today, down 14 sen or 3.64% to close at its intra-day low of RM3.71, after a Minister was reported as saying that the group will be “out of the picture” should the RM2.55 billion deal go through.

Minister of Water, Land and Natural Resources Dr Xavier Jayakumar later clarified that the RM2.55 billion offer for SPLASH is inclusive of the O&M contract for the SSP3 Water Treatment Plant.

"Now there is no separate O&M deal, [it is] all inclusive, so now if Air Selangor [Pengurusan Air Selangor Sdn Bhd] wants to subcontract O&M to anybody, it is the management of Air Selangor who will do it," he told reporters.

"The assets are transferred to us and we will lease it to Air Selangor, and Air Selangor will take over the whole management including O&M," he explained.

On the other hand, KPS is expected to receive an upfront lump sum of cash totaling RM570 million or about RM1.06 per share, with the remaining RM195 million to be paid in instalments over a period of nine years.

A bumper dividend is said to be on the cards for KPS’s sharesholders, according to analysts familiar with the deal.

Shares in KPS slid one sen or 0.54% to close at RM1.83 with 1.48 million of its shares traded today.