KUALA LUMPUR (Dec 2): The proposed merger of UEM Sunrise Bhd and EcoWorld Development Group Bhd, which was put forth by UEM Group, does not require the approval of the Cabinet, said Minister of Finance Tengku Datuk Seri Zafrul Tengku Abdul Aziz.

Tengku Zafrul said the proposal was mooted based on the potential commercial benefit the merger could bring, and that it only requires the approval of the respective companies' boards of directors, as it is a matter relating to the operation of companies.

The minister said this in a written parliamentary reply, dated Dec 1, to Kepong member of parliament (MP) Lim Lip Eng.

Lim had asked the minister to state whether the proposed merger of UEM Sunrise with EcoWorld, through an exchange of shares and warrants, had been approved by the Cabinet. He also requested for a detailed explanation on how the proposal would benefit Khazanah Nasional Bhd as the parent of UEM Group.

Balik Pulau MP Muhammad Bakhtiar Wan Chik and Damansara MP Tony Pua had also asked the minister last week on the rationale of the exercise and to state the benefits that would be enjoyed by Khazanah’s subsidiary.

At the time, Tengku Zafrul said the merger proposal was still in the early stages of discussion and would be subject to the implementation of a detailed study (due diligence) as well as the agreement of all shareholders of UEM Sunrise and EcoWorld, if both companies agreed to start further merger discussions.

“Any decision related to this proposed merger is commercial in nature and it is the responsibility of the companies involved to ensure that this merger produces the best synergy by taking into account the interests of the shareholders of their respective companies,” Tengku Zafrul reiterated in his latest reply.

On Oct 5, UEM Group said it has proposed the merger of its property development arm UEM Sunrise with EcoWorld, via a swap of shares and warrants between the two companies.

UEM Group said it saw a "pressing need for industry players to consolidate resources and capabilities" to withstand the headwinds that property developers are currently facing.

Under the proposed deal, UEM Sunrise will issue new shares at 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 then.

It was reported yesterday that the Securities Commission Malaysia (SC) had approved UEM Sunrise's application for more time to announce any firm intention to make a takeover offer for EcoWorld. UEM Sunrise now has until Jan 31 next year to make its announcement on the matter, the group said in a filing with Bursa Malaysia.

But the SC wants UEM Sunrise and EcoWorld to decide by Jan 2 whether to proceed with discussions on the proposed merger. If they wish to proceed, they must jointly submit an application, by Jan 15 at the latest, for a final extension of time based on a timeline agreed by their boards of directors.

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