Acquisition means Sunrise will realise value over shorter period, potential to be regional player

KUALA LUMPUR: The proposed acquisition of Sunrise Bhd by UEM Land Holdings Bhd will enable Sunrise to realise its value over a shorter period of time while allowing it to be part of a potential regional player, said Sunrise executive chairman Datuk Tong Kooi Ong.

"The acquisition will substantially enhance the capital structure and allows Sunrise to generate more sustainable earnings with possibility of new businesses," said Tong during a press conference following the announcement of the proposed acquisition on Thursday, Nov 4.

He cited Singapore-based CapitaLand Ltd, one of Asia's largest real estate companies, as an example of a successful merger that took two local players to the global stage. DBS Land and Pidemco Land merged in 2000 to form CapitaLand Ltd.

"Realistically, for me alone to try to turn Sunrise into a global player like CapitaLand would take the rest of my life. This way, it allows Sunrise to be part of a company that can compete regionally and globally," said Tong.

UEM Land had announced the proposed a conditional voluntary general offer to acquire Sunrise at RM2.80 per share or about RM1.39 billion on Thursday morning. The merged entity will have a landbank of about 12,000 acres and a combined asset base of about RM5 billion.

Tong along with Datuk Allan Lim Kim Huat and Tan Sri Tan Chee Sing have given their irrevocable undertakings to accept the offer in respect of their stakes totaling 40.3% in Sunrise.

"This is an indication by us to the shareholders and the public that we believe in the potential of this deal and that it makes sense," said Tong.

He acknowledged that the question of business "culture clashes" was foremost in his mind when the offer was first made, and stressed that it was crucial to the success of the new entity to retain the talents of both companies.

"What we will try to do is not to force a merger and allow the employees in the two companies to work parallel to one another. Over time and with more interaction, both parties will feel more comfortable. Hopefully, this will diffuse a lot of potential human issues that may arise," he added.

Also present at the press conference called by UEM Land were UEM Group Bhd group managing director and chief executive officer Datuk Izzaddin Idris and UEM Land managing director and chief executive officer Datuk Wan Abdullah Wan Ibrahim.

Izzaddin said that one of the driving factors for the acquisition is the talent theat Sunrise possesses. "We have to give recognition to Sunrise's employees for all they have achieved. We see universal values in both companies such as quality service and products. There are bound to be noises along the way but we think we can keep that minimal," he said.

(From left): Wan Abdullah, Izzaddin and Tong at the press conference. Photo by Mohd Izwan Mohd NazamMeanwhile, Wan Abdullah said the acquisition will allow UEM Land to participate in Sunrise's development in the Klang Valley, including in Mont Kiara, in the KLCC area and in Shah Alam. Sunrise, on the other hand, will be able to partake in UEM Land's developments in Nusajaya in Iskandar Malaysia, Johor.

"We are basically a township developer, and Sunrise has the expertise and proven track record in high-rises and integrated developments, so both companies will complement each other," said Wan Abdullah.

If the offer is successful, UEM Land will retain the Sunrise brand and its employees. Tong will remain as chairman of Sunrise, while Wan Abdullah will assume the position of managing director of Sunrise. Izzaddin will be appointed to the board of Sunrise.

Tong will also be named a director of UEM Land, and chair the Development Committee of both UEM Land and Sunrise.

The offer price of RM2.80 per share represents a premium of 30.4% to the one month volume weighted average price of Sunrise shares up to Nov 2, after taking into consideration the interim dividend of RM0.20 per share announced by Sunrise on Nov 3.

The proposed acquisition will be undertaken via a conditional voluntary general offer and as part of the terms, shareholders of Sunrise can elect to receive either 1.33 new UEM Land ordinary shares of RM0.50 each at RM2.10 per share, or 2.8 redeemable convertible preference shares (RCPS) at an issue price of RM1.00 per RCPS.

The RCPS are convertible into UEM Land shares at RM2.30 per share at anytime during the tenure of the RCPS, and are redeemable at 100% of their issue price only at maturity.

The offer is conditional upon UEM Land receiving acceptance of more than 50% of Sunrise shares from its shareholders. Upon successful completion of the offer, UEM Land will seek to delist Sunrise should it not have the requisite public shareholding spread to maintain its listing status on Bursa Malaysia.

The exercise is expected to be completed in the first quarter of 2011.
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