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Gapurna rejected PKNS offer

KUALA LUMPUR: Selangor Menteri Besar Tan Sri Khalid Ibrahim said the state government was prepared to pay a better price than Malaysian Resources Corp Bhd (MRCB) to acquire Nusa Gapurna Development Sdn Bhd’s (NGD) 70% stake in PJ Sentral Development Sdn Bhd. NGD has proposed to dispose of the 70% stake as part of a bigger corporate exercise valued at RM729 million.

MRCB will seek shareholders’ approval for the corporate exercise at an EGM today.

Khalid told reporters after a state executive council meeting that PKNS had exercised its pre-emptive rights and made an offer to acquire the 70% stake in PJ Sentral Development.

“We cannot oppose the deal itself, but we can confirm that PKNS was willing to offer a better price and a better valuation than (what) MRCB had proposed,” he said.

NGD had declined the state’s offer, which was put forward last week, he said.

“We have made an offer to acquire [PJ Sentral Development], but they rejected it,” said Khalid.

The Edge weekly reported last week that the Selangor State Development Corp (PKNS) had previously sent out an official letter to NGD to object to NGD’s disposal of its 70% stake in PJ Sentral Development to MRCB. PKNS has 30% equity interest in PJ Sentral Development.

Following a valuation exercise carried out by MRCB, NGD’s 70% stake has an adjusted net asset value of RM179.59 million, which includes a net revaluation surplus of RM50.29 million.

The PJ Sentral development is one of the better assets that NGD is disposing of to MRCB in return for cash and shares.

The deal will see MRCB buying into NGD’s 70% stake in PJ Sentral Development as well as the entire equity interest in NGD’s wholly owned subsidiaries — Gapurna Builders Sdn Bhd (GBS), Gapurna Land Sdn Bhd (GLS) and Puncak Wangi Sdn Bhd. The total consideration for this portion is RM459 million, to be satisfied with cash and MRCB shares.

The Gapurna group is also disposing of Gelanggang Harapan Construction Sdn Bhd and Gapurna Global Solutions Sdn Bhd, which are associated companies under the Gapurna group, for RM270 million.

NGD has dispelled PKNS’ claim of having pre-emptive rights to acquire the 70% stake.

In a filing with Bursa Malaysia yesterday, MRCB announced that NGD has notified PKNS over the right to refusal and the counter offer.

“NGD disagrees with PKNS’ interpretation of its pre-emption right under the shareholders’ agreement, premised on the clear terms of the agreement, and that the Drag Along Notice is valid and enforceable,” it said.

“PKNS has communicated an offer to purchase NGD’s 70% equity interest in PJ Sentral, which was rejected since PKNS does not have any enforceable pre-emption rights. NGD remains committed to the share sale agreement with MRCB,” it said.

NGD had served a Drag Along Notice to PKNS on April 23 to compel PKNS to cooperate in the sale of its remaining 30% stake, valued at RM83.5 million.

According to a source familiar with the matter, the state-owned developer is planning to seek legal recourse by way of filing suit for a breach of contract.

While this may prolong the stalemate between PKNS and NGD, it is not expected to stall the RM729 million corporate exercise between MRCB and Gapurna. MRCB and NGD had entered into a supplemental agreement to allow MRCB to proceed with acquiring other subsidiaries should the PJ Sentral deal encounter hiccups along the way. 

This means that the parties are allowed to conclude a deal over PJ Sentral Development at a later date and not at the same time as the acquisitions of GBS, GLS and Puncak Wangi.

MRCB is pushing for the acquisition to enhance its total landbank and recruit top management, with NGD chief Datuk Mohamad Salim Fateh Din tipped to become the new CEO of the government-linked property and infrastructure developer.

NGD and its subsidiaries currently own approximately 13ha of prime development land with an estimated gross development value of RM5.86 billion.

According to a recent note from CIMB Research, MRCB’s pricing was based on independent valuations over the targeted land under Nusa Gapurna, which came at an attractive premium of 44% to 157% to the net book value.

The research house expressed surprise that the offer failed to induce PKNS to participate in the deal.


This article first appeared in The Edge Financial Daily, on June 20, 2013.

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