KUALA LUMPUR (Nov 27): Zecon Bhd is disposing of a 49% stake in its wholly-owned subsidiary Zecon Medicare Sdn Bhd to the Sarawak state government for RM155 million as part of plans to partially monetise its investment in the unit at an attractive pricing, while allowing the group to continue participating in the future operations of Zecon Medicare.

The proposed disposal will also provide the group with financial flexibility in optimising its capital structure and managing its funding requirements, Zecon added.

Zecon Medicare holds the 30-year concession to develop the UKM Specialist Children's Hospital, granted by the federal government.

In a filing with Bursa Malaysia today, Zecon said it has entered into a share purchase agreement (SPA) with the State Financial Secretary of Sarawak (SFSS) for the disposal of 3.92 million shares or a 49% stake in Zecon Medicare Sdn Bhd, subject to certain terms and conditions.

"The concession period shall be for a period of 30 years which commenced from May 29, 2014, comprising 54 months' construction period, subject to terms and conditions of the concession agreement," it added.

The completion of the proposed disposal is subject to the fulfilment of conditions precedent of the SPA, which include a written approval from the federal government through the Public Private Partnership Unit of the Prime Minister's Department for the acquisition of the sale shares by SFSS and the approval of Zecon shareholders for the proposed disposal.

Zecon said it plans to use proceeds from the proposed disposal to repay bank borrowings (RM70 million), for working capital (RM84.8 million) and estimated expenses in relation to the proposals (RM200,000).

"The group's total borrowings as at Oct 31, 2017 amounted to approximately RM350.4 million. The proposed repayment of part of the group's bank borrowings amounting to RM70 million is expected to contribute to interest savings of the group," it added.

The proposed disposal is expected to be completed by the first half of 2018.

At 3.13pm, Zecon shares were up one sen or 1.37% at 74 sen, with 809,000 shares done, bringing a market capitalisation of RM96.95 million.