KUALA LUMPUR (March 2): Property developer Plenitude Bhd has proposed to undertake a conditional take-over offer to acquire The Nomad Group Bhd for RM1.25 a share or RM278.84 million via the issuance of 111.53 million new Plentitude shares at an issue price of RM2.50 per Plentitude share.

Through its hotel segment, Nomad Group (fundamental: 1.05; valuation: 1.2) owns Novotel Kuala Lumpur City Centre, The Nomad SuCasa, GLOW Penang and The Nomad Serviced Residences Bangsar.

It also owns The Nomad Offices in Kuala Lumpur, Singapore, Ho Chi Minh City, Bangkok, Jakarta and Manila, covering over 194,700 sq ft of office space. However, the group is disposing of its assets and business of serviced offices to Regus Asia Pacific Management Ltd for RM22.3 million cash, which is expected to be completed by the first quarter of this year.

In a filing with Bursa Malaysia today, Plenitude (fundamental: 2.7; valuation: 1.8) said under the proposed acquisition, Nomad Group shareholders who accept the offer will receive one Plenitude share for every two Nomad Group shares surrendered.

"Based on Nomad Group's issued and paid-up share capital comprising 223.07 million shares as at the date of this announcement, the maximum number of Plenitude shares to be issued under the proposed offer is 111.53 million Plenitude shares, representing 29.2% of Plenitude’s enlarged issued share capital," said Plenitude.

Plenitude said with the issuance of up to 111.53 million consideration shares, the offer would increase its issued share capital from 270 million shares to up to 381.53 million.

"This may result in a larger market capitalisation and may lead to higher trading liquidity for Plenitude shares. In turn, these will provide an avenue to attract more investor," it added.

Plenitude said the issuance of new Plenitude shares will allow the group from having to raise cash proceeds upfront via borrowings to satisfy the offer. 

"Notwithstanding the immediate dilutive effect to the shareholders of Plenitude resulting from the issuance of the consideration shares, there will not be any immediate need for fundraising, be it from the existing shareholders, the capital markets and/or financial institutions in the form of borrowings," it added. 

Plenitude said the proposed offer represents an opportunity for the group to expand its hotel segment in a bid to diversify its earnings base and enhance its source of recurring income.

"For the financial year ended June 30, 2014, the hotel segment, which is comprised solely of Plenitude Group’s Four Points by Sheraton Penang hotel, contributed 4.13% of the group’s total revenue.

"With the company’s recent acquisition of The Gurney Resort Hotel & Residences (expected to be completed by the first half of 2015), the revenue contribution from the hotel segment is expected to grow further," said Plenitude.

"Hence, in order to accelerate the growth of its hotel segment, Plenitude has identified the acquisition of existing hotels at suitable locations as the preferred strategy to drive its expansion plan," it added.

Through the acquisition of Nomad Group, Plenitude expects its hotel segment to be given a boost with the addition of Nomad Group’s four hotel and hospitality assets. 

Following the acquisition, Plenitude does not intend to maintain the listing status of Nomad Group.

"Plenitude believes that operating Nomad Group as an unlisted company would provide it with greater flexibility to adopt longer-term planning consistent with longer-term investment horizons when formulating its growth, business, funding and operational strategies without the continuous need to incur costs to comply with the Main Market Listing Requirements of Bursa Securities," it added. 

Plenitude also said it has no plan to dismiss or make redundant employees of the Nomad Group.

The proposed acquisition is expected to be completed by the second quarter of this year.

Plenitude shares closed three sen lower at RM2.29, giving it a market capitalisation of RM624.4 million. Nomad Group's share price, meanwhile, edged up seven sen to settle at 90 sen today, translating into market capitalisation RM185.15 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)