KUALA LUMPUR: Minority shareholders of loss-making property Tradewinds Corp Bhd (TCB) voted in favour of the privatisation of the company by selective capital reduction (SCR) and repayment at its EGM yesterday.

The exercise is part of Tan Sri Syed Mokhtar Al-Bukhary’s bid to privatise the entire operations of his property and hotel arm via his three privately owned companies — Perspective Lane (M) Sdn Bhd, Kelana Ventures Sdn Bhd and Seaport Terminal (Johore) Sdn Bhd. They collectively own 71.49% of TCB prior to the proposed SCR.

The SCR will entitle shareholders to a total capital repayment of RM347 million or RM1.10 per share. TCB expects the repayment to be completed by the second quarter of 2013, along with the subsequent delisting of the stock.

It is expected to be financed via loans from major shareholders or financing institutions. Upon completion of the exercise, the majority shareholders will hold 759.03 million shares, representing the entire issued and paid-up share capital of TCB.

According to TCB CEO Shaharul Farez Hassan, the rationale is to provide shareholders the opportunity to exit their positions as the company’s earnings volatility is expected to increase significantly within the next few years.

The company’s participation in various new property development projects is expected to require a massive capital expenditure, which will adversely impact its cash flow position and dividend payment. As a result, TCB may not be able to meet shareholders’ expectations.

In addition, TCB’s loan repayment commitments will increase its gearing position, and the company does not expect to receive immediate returns from its existing ventures.

Projects to be undertaken by the company for the next few years include the redevelopment of Menara Tun Razak, Kompleks Antarabangsa, Crowne Plaza Mutiara Hotel, Mutiara Burau Beach Resort Langkawi and Perdana Quay Langkawi. The total expected costs are estimated at RM5.58 billion.

According to Bursa Malaysia filings, TCB incurred net losses of RM126.34 million for the fourth quarter ended December 2012, compared with losses of RM27.53 million a year ago. A huge chunk of the losses was attributed to impairments and  writeoffs of assets in its hotel properties division.

The privatisation of TCB follows the successful privatisation of Tradewinds Malaysia Bhd (TWM) earlier this year. This will be followed by the privatisation of TWM’s two subsidiaries —  Padiberas Nasional Bhd (Bernas) and Tradewinds Plantation Bhd — through Syed Mokhtar’s private vehicles.

The offer prices for Bernas and Tradewinds Plantation are RM 3.70 and RM5 per share respectively. The deadline for acceptance is by 5pm tomorrow.

It is believed that the numerous privatisation exercises will enable Syed Mokhtar to restructure the conglomerate’s highly diversified portfolio and consolidate the group’s overlapping businesses.

This article first appeared in The Edge Financial Daily, on April 24, 2013.