This article first appeared in The Edge Financial Daily on October 11, 2017

KUALA LUMPUR: Sunway Bhd’s subsidiary, Sunway Lagoon Sdn Bhd (SLSB), has proposed to raise its stake in property developer Sunway South Quay Sdn Bhd (SSQ) to 80% from 60%.

Sunway said SLSB is acquiring the additional 20% stake, comprising 50,000 shares, from Kuwait Finance House (M) Sdn Bhd (KFH) for RM136.65 million.

It added that SLSB also intends to repay RM73.35 million in cash on behalf of SSQ towards the settlement of the Musyarakah Capital invested by KFH in SSQ.

In a filing with Bursa Malaysia, Sunway said the higher ownership of SSQ is expected to contribute positively to its future earnings.

In November 2005, SSQ, SLSB and KFH entered into an agreement for the subscription by SLSB and KFH of shares in SSQ. Subsequently, SLSB, KFH and SSQ also entered into a Musyarakah shareholders’ agreement to record the joint-venture arrangement and the rights and obligations of SLSB and KFH as shareholders of SSQ for the development projects to be undertaken by SSQ.

SSQ is primarily involved in the development of Sunway South Quay, a mixed development located in the integrated township of Sunway City.

Sunway said the purchase consideration was arrived at based on negotiations between Sunway and KFH on a “willing buyer, willing seller” basis after taking SSQ’s net assets and earnings prospects into consideration, and will be funded through bank borrowings and internally generated funds.

“The increase in the stake is an affirmation of Sunway’s confidence and commitment to the long-term prospects and success of Sunway South Quay,” it added.

The exercise is scheduled to be completed in the last quarter of 2017.