The lapsed merger deal between UEM Sunrise Bhd and Eco World Development Group Bhd comes on the heels of the re-imposition of the Movement Control Order, which has been cited as one of the reasons to stop pursuing the plan. When it was first announced last October, observers were mixed on the proposed merger via a swap of shares and warrants between the two companies, with critics calling it a bailout of EcoWorld.
For now, the political noise about the bailout claim can be put aside. It also alleviates market concerns that state-owned investment fund Khazanah Nasional Bhd, which is the largest shareholder of UEM Sunrise, may have to provide financial support to the enlarged group if needed.
Even if the merger had materialised, it would not have been easy for two very different companies to adapt to each other’s corporate culture.
Over the years, EcoWorld, which was founded by tycoon Tan Sri Liew Kee Sin, has raised the bar by developing luxury property townships. It should continue to take advantage of the reputation it has built. For UEM Sunrise, the strategy would be to better utilise its large landbank to maximise value and strengthen its marketing campaigns.
Certainly, the property sector, battered by weak property sales and lacklustre interest, owing to oversupply, will now take an even longer time to recover in view of the stricter measures to contain Covid-19. Nevertheless, it has the low interest rate environment in its favour.
It remains to be seen how severe an impact the MCO 2.0 will have on the economy. What will the two property developers do to ride out the challenging environment?
Whatever it is, both will have to move on and chart their own course.