KUALA LUMPUR (April 26): PPB Group Bhd is acquiring the Armed Forces Fund Board's (LTAT's) 16.8% stake in Hillcrest Gardens Sdn Bhd for RM59.06 million.
Hillcrest's audited consolidated net assets as at Dec 31, 2017 stood at RM199.55 million, including 147.78 acres of freehold land in Taman Seri Gombak and Taman Puchong Utama, PPB said in a filing with Bursa Malaysia.
The purchase consideration represents a premium of 76% over 16.8% of audited consolidated net assets, PPB said.
"The company deems the premium reasonable after considering the strategic location, as well as the prospects and development potential of the lands, although the actual value can only be ascertained based on Hillcrest’s eventual development plans, which the company is not privy to at this juncture," the filing added.
In comparison, LTAT’s original cost of investment for the stake in 1976 was RM1.2 million.
PPB said it initiated the proposed acquisition to expand its investments in property-based activities and enable the group to continue diversifying its source of earnings.
Additionally, PPB sees the 147.78 acres of land owned by Hillcrest to be strategically located and expects to have good development potential.
"Although PPB will only own 16.8% equity interest in Hillcrest after the proposed acquisition, the future development of the land by Hillcrest is expected to contribute positively to the group’s future earnings," the filing added.
As the acquisition will be internally funded, it will not have any effect on the gearing of the group, PPB added.
PPB's major shareholder Kuok Brothers Sdn Bhd has a 51.9% direct and indirect interest in Hillcrest.
However, approval from PPB shareholders is not required as the deal only represents 0.28% of applicable financial ratios to measure related party transactions.