KUALA LUMPUR (Oct 5): UEM Group Bhd has proposed to merge its property development arm UEM Sunrise Bhd with Eco World Development Group Bhd (EcoWorld) in a deal that will entail an exchange of securities, confirming a report by The Edge.
In a letter proposing the merger that was filed with Bursa Malaysia, UEM Group said it proposed the merger as it saw a "pressing need for industry players to consolidate resources and capabilities" to withstand the headwinds that property developers are currently facing.
UEM Group said holders of shares and warrants in EcoWorld will swap the securities for new shares and warrants in UEM Sunrise.
Under the deal, new shares in UEM Sunrise will be issued at a proposed 44.3 sen each to holders of EcoWorld shares — for all the shares held in the latter at an exchange price of 46.9 sen.
“This will result in an exchange ratio of approximately 1.0587 new UEM Sunrise shares for every one EcoWorld Share held,” UEM Group said, adding that the ratio was determined by dividing EcoWorld’s share exchange price with UEM Sunrise’s share issue price.
“The proposal will be implemented by way of a members' scheme of arrangement between EcoWorld and its shareholders under Section 366 of the Companies Act 2016,” UEM Group added.
Meanwhile, the proposed new warrants in UEM Sunrise will be issued to all holders of the outstanding warrants in EcoWorld at the share exchange ratio, which translates into 1.0587 new UEM Sunrise warrants for every EcoWorld warrant. The EcoWorld warrants will then be cancelled.
UEM Group said after the merger, the enlarged UEM Sunrise will focus on property developments in Malaysia as well as planned developments on land it owns outside of Malaysia.
"This will allow the enlarged UEM Sunrise group to stay focused on property developments within Malaysia," it added.
Upon completion of the proposed merger, EcoWorld will become a wholly-owned subsidiary of UEM Sunrise and be delisted.
According to UEM Group, it holds a 66.1% stake in UEM Sunrise. UEM Group itself in turn is a unit of sovereign wealth fund Khazanah Nasional Bhd.
After the merger, Khazanah — through UEM Group — will remain the single largest shareholder of UEM Sunrise as well as EcoWorld on a collective basis.
Meanwhile, EcoWorld executive chairman Tan Sri Liew Kee Sin will have a 3.6% stake in UEM Sunrise, while his son and executive director Liew Tian Xiong will hold 2.8%. Three entities that have stakes in EcoWorld — namely Sinarmas Harta Sdn Bhd, Eco World Development Holdings Sdn Bhd and Jernih Padu Sdn Bhd — will hold stakes of 12.6%, 3.4% and 1.9% respectively.
UEM Group also proposed for UEM Sunrise to be led by a chairman who currently sits on its board of directors.
“We envisage that the composition of the board of directors and key management of the enlarged UEM Sunrise will be determined by an integration committee to be formed, which will comprise representatives of UEM Sunrise and EcoWorld,” it said.
The integration committee will be co-chaired by the respective chairmen of UEM Sunrise and EcoWorld, according to the statement.
UEM Group said a new employees’ share option scheme for staff of the enlarged property developer had also been proposed as part of the merger.
“We recognise there may be a need to reorganise and streamline the enlarged UEM Sunrise group's operations upon completion of the proposed merger. However, taking into account the adverse impact of Covid-19 on the job market, we hope there will not be any immediate redundancy or dismissal of staff of the parties as a direct consequence of the proposed merger.”
UEM Sunrise has a presence in Peninsular Malaysia and Australia, with a remaining land bank of over 12,000 acres (4,856.23ha) — mostly in Iskandar Puteri, one of the flagship zones of Iskandar Malaysia where it is also a master developer.
Meanwhile, EcoWorld has launched 25,357 properties with cumulative sales of RM20.5 billion since it debuted in 2013, and indirectly holds a 27% stake in Eco World International Bhd (EWI), a listed developer with a footprint in the UK and Australia, where it has achieved cumulative sales of RM13.4 billion.
"The board will convene in the near term to deliberate over the proposed merger and will make a further announcement thereafter," said EcoWorld in a corresponding filing on the matter.
As at the time of writing today, UEM Sunrise was up 4.5 sen or 12.5% at 40.5 sen, valuing the group at RM1.84 billion, while EcoWorld was up three sen or 7.59% higher at 42.5 sen, giving it a market capitalisation of RM1.27 billion.
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