PNB to buy SILK Highway for RM380 mil

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KUALA LUMPUR (Jan 18): Silk Holdings Bhd's toll concession asset will be sold to Permodalan Nasional Bhd (PNB) for RM380 million, both said in a joint statement today.

According to the press release, Silk Holdings has entered into a conditional share purchase agreement with PNB for the disposal of 100% of the issued and paid-up share capital of Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd (SILK) for a cash consideration of RM380 million.

This confirmed The Edge Financial Daily's report that a government-linked fund is involved in preliminary talks with Silk Holdings to buy the asset.

SILK is the concession holder of the 37-kilometre Kajang Traffic Dispersal Ring Road (SILK Highway) under the concession agreement executed in October 1997 to finance, design, construct, operate and maintain the SILK Highway for 36 years, ending July 31, 2037.

Recall that before PNB, there had been three different parties expressing interest to buy into SILK Highway since 2014 — IJM Corp Bhd, Taliworks Corp Bhd and WZ Satu Bhd — before they made a U-turn.

In the press release, it said Silk Holdings intend to allocate up to RM200 million for future investments including enhancing and strengthening its existing offshore marine support services business and investment in related businesses in the oil and gas segment as well as other viable investment opportunities to be identified, up to RM70 million for distribution to Silk Holdings' shareholders, and RM110 million for general corporate and working capital and others.

It added that the disposal is in line with the group's strategy to monetise and unlock value of its infrastructure assets to allow Silk Holdings to streamline its operations and use its financial resources to focus on offshore marine support services.

As for PNB, the acquisition is part of its strategy to expand and enhance its existing portfolio of highway infrastructure assets which provide recurring income stream, in line with its objective of enhancing long-term sustainable returns to its unit holders.

PNB's existing investment in highway concessions is currently through its wholly-owned subsidiary Project Lintasan Kota Holdings Sdn Bhd, which operates three highways, namely Ampang Kuala Lumpur Elevated Highway (AKLEH), Guthrie Corridor Expressway (GCE) and Lebuhraya Kemuning Shah Alam (LKSA).

The proposed disposal is expected to be completed by the first quarter of 2017, subject to all relevant approvals being obtained and the fulfilment of several conditions including the completion of due diligence.

Shares in Silk Holdings have been suspended from trading today and were last traded at 41 sen yesterday, giving it a market capitalisation of RM284.1 million, representing a significant increase of 19.1% year to date.