KUALA LUMPUR (Sept 22): The second attempt to sell DRB-Hicom Bhd's 90% stake in Corwin Holding Pte Ltd, which owns properties in Singapore, saw the selling price being slashed by 40% compared to an earlier attempt to dispose of the interest in December 2015.
In a bourse filing today, DRB-Hicom announced that its indirect wholly-owned subsidiary Hicom Megah Sdn Bhd together with the minority shareholders, namely Mohamed Mustafa & Samsuddin Co Pte Ltd and BI Distributors Pte Ltd, would sell Corwin to Columba Holdings Pte Ltd for S$189.7 million (RM575.3 million).
This is at a 40% discount from the previous attempt to sell Corwin to Evolutyon Real Estate Investment Holding Pte Ltd for S$317 million (RM964.6 million) late last year.
The sale to Evolutyon was aborted May this year when it failed to fulfill its contractual obligations by the agreed completion date.
Corwin, which is involved in property investment, owns The Verge leasehold commercial development comprising an eight-level shopping mall building and another eight-storey building known as 'The Chill'.
The Verge is located at No. 2, Serangoon Road, Singapore and has a total gross floor area of 238,527 square feet. Its net book value as at March 31, 2016 was S$140 million.
DRB-Hicom said the consideration was arrived at on a willing buyer-willing seller basis, determined based on the adjusted net tangible assets (NTA) of Corwin as at June 30, 2016 after incorporating the agreed market value of The Verge at S$273 million.
DRB-Hicom said Hicom Megah and the minority shareholders entered into a conditional share sale agreement (SSA) with Columba to dispose of 100% interest in Corwin comprising 14.5 million shares and 866,840 redeemable preference shares.
It also said its indirect wholly-owned unit Glenmarie Properties Sdn Bhd will provide guarantees to Columba in respect of the performance obligations by the vendors after the SSA.
"The proposed disposal will allow DRB-Hicom to unlock the value of its investment in Corwin based on the current market value of The Verge," it said, adding that Corwin would cease to be an indirect 90%-owned subsidiary of the group.
It said The Verge's market value, based on independent valuer Knight Frank Pte Ltd's valuation dated Aug 29, 2016, amounted to S$150 million. It did not take into account potential redevelopment value.
Hicom Megah's total investment in Corwin from 1997 until 2016 amounted to approximately RM224.9 million.
DRB-Hicom said that assuming the proposed sale was completed by the third quarter of financial year ending March 31, 2017, it would net an estimated gain of approximately RM348.214 million.
It added that the sale would reduce its gearing ratio from 0.81 times to 0.75 times and improve the net assets of DRB-Hicom by about RM348.214 million upon exclusion of Malayan Banking Bhd's loan by Corwin of approximately S$84.52 million and realisation of net gain from the proposed disposal respectively.
Hicom Megah's expected share of the net sales proceeds of about S$167.8 million will be used for DRB-Hicom's working capital requirements within 12 months from the completion date.
The sale is expected to be completed by the fourth quarter of 2016 and does not require the approval of DRB-Hicom's shareholders.
Columba is a wholly-owned subsidiary of Dorado Holdings Pte Ltd, which in turn is a 50:50 joint venture company between Tucana Investments Pte Ltd and LAO V Serangoon Pte Ltd.
Tucana is a wholly-owned subsidiary company of Lum Chang Holdings Ltd listed in Singapore.
LAO V Serangoon is a wholly-owned subsidiary of LaSalle Asia Opportunity V LP, a closed-end, pan-Asia opportunistic fund managed by LaSalle Investment Management Asia Pte Ltd.
DRB-Hicom closed 3 sen or 2.05% higher at RM1.49 for a market capitalisation of RM2.88 billion.