KUALA LUMPUR (Mar 9): CapitaMalls Malaysia Trust (CMMT) announced proposals for a placement and increase in fund size to raise RM395.5 million to partly fund the proposed acquisition of Tropicana City Mall and Tropicana Office Tower in Petaling Jaya for RM540 million.

This follows the completion of a due diligence exercise and market valuation for the proposed acquisition, CMMT (fundamental: 1.8; valuation: 1.0) said in an announcement to Bursa Malaysia today.

It said the vendor was notified of several minor irregularities during the due diligence exercise.

The vendor has agreed to rectify these irregularities and shall complete the rectification before the sales and purchase agreement (SPA) becomes unconditional.

“Following the completion of the due diligence exercise, whereby the results are satisfactory, Condition Precedent no. 2.5(a) as set out in the previous announcement has been satisfied,” said CMMT.

It added that the property has been valued at RM560 million by Henry Butcher Malaysia Sdn Bhd on Feb 1, 2015, as set out in a report dated Feb 28, 2015.

As such, CMMT’s manager CapitaMalls Malaysia REIT Management Sdn Bhd has proposed to allot, issue and place up to 299.6 million new units in CMMT. This would result in a corresponding increase in CMMT’s existing units in issue from 1.78 billion units up to 2.08 billion units.

Of the 299.6 million units, 190.8 million units shall be placed out to placees to be identified later, at a final issue price to be determined and announced to raise gross proceeds of up to RM251.85 million.

As part of the exercise, up to 108.8 million units shall be placed out to CMMT Investment Ltd (CIL) at the final placement price, subject to gross proceeds amounting up to RM143.65 million.

The 108.8 million units make up 36.32% of the total new units to be placed out under the proposed placement, which represents the unitholdings of Capitamalls Asia Ltd’s stake in the trust, held via CIL and Menang Investment Ltd (MIL).

Capitamalls Asia is CMMT’s largest unitholder.

CIL and MIL have given an undertaking to take up its share in the placement.  

CMMT said the proposed placement is the most appropriate avenue of fund raising as it will enable the trust to part finance or part refinance the debt incurred for the proposed acquisition, in line with its capital management strategy.

The balance of the purchase consideration is expected to be financed via debt.

The proposed placement will also increase the number of units in circulation, which may improve the trading liquidity of CMMT and widening its unitholder base.

On Jan 26, CMMT announced the proposed acquisition of the property from Tropicana Corp Bhd.

(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.)