KUALA LUMPUR (June 22): S P Setia Bhd has signed a conditional share purchase agreement to acquire I&P Group Sdn Bhd from its controlling shareholder Permodalan Nasional Bhd (PNB) for RM3.65 billion cash.

For the massive acquisition, S P Setia is proposing a cash call plus private placement to raise the required funding.

The group’s fundraising proposal involves a renounceable rights issue of new shares, renounceable rights issue of a new Class B Islamic redeemable convertible preference shares (RCPS-i B), and a private placement of new shares, with each exercise expected to raise RM1.2 billion.

The RCPS-i B has a profit rate of 5.93% a year, is non-callable for the first five years, and will be convertible to ordinary shares at a conversion ratio to be determined later. Its entitlement basis and the issue price will be fixed at a later stage, S P Setia said.

In its statement this evening, S P Setia explained that the purchase price is at a discount of approximately 39.3% to the adjusted unaudited net asset value (NAV) of I&P Group.

“After factoring in (three) independently appraised market values, the adjusted unaudited NAV is RM6.01 billion,” the group said.

The three independent valuers had also found the aggregated market value of I&P Group’s properties to be RM7.39 billion, while unaudited net asset value (NAV) of I&P Group as at 30 April 2017 was RM3.23 billion.

Both the proposed acquisition and the fundraising proposals are subject to shareholders’ approval.

“This synergistic acquisition will further strengthen Setia’s brand presence in Malaysia and help pave the way for the creation of greater shareholder value for S P Setia. I&P’s land banks are located in Klang Valley and Johor Bahru, and mostly in areas where S P Setia had established a stronghold with its Setia brand,” said Datuk Khor Chap Jen, president and CEO of S P Setia.

To recap, the group had entered into a non-binding Memorandum of Intent (MOI) on April 14 with PNB and Amanahraya Trustees Bhd (on behalf of Amanahraya Saham Bumiputera) to commence negotiations on the proposed negotiations.

The I&P Group has 4,276 acres of land bank, which combined with the land bank of S P Setia would total 9,417 acres, making S P Setia the third largest property developer in Malaysia by such a measure.

S P Setia’s share price dropped two sen at RM3.62 per share today on 3.87 million shares exchanged, giving it a market capitalisation of RM10.34 billion.