KUALA LUMPUR (June 27): IGB Corporation Bhd will reap an estimated RM770 million cash from the listing of IGB Real Estate Investment Trust (IGB REIT) that houses two shopping malls — Mid Valley Megamall and The Gardens Mall.
IGB Corp will receive cash proceeds, in the form of capital repayment, from its 63.5%-owned KrisAssets Holdings Bhd, which is disposing the two malls into IGB REIT.
With the fresh proceed from the IPO, IGB Corp will sit on net cash of RM484 million. As at Dec 31, the group had net borrowings of RM285.29 million.
IGB REIT, which is expected to debut in mid-August on Bursa Malaysia, will be the biggest REIT in Malaysia, in terms of asset value, after Pavillion REIT, Sunway REIT and Capitamalls Malaysia Trust (CMMT).
IGB REIT's asset value is at RM4.6 billion, which is higher than its peers that are currently listed on Bursa. Pavillion REIT's net asset value stands at RM2.87 billion, Sunway REIT at RM2.77 billion and CMMT at RM1.95 billion.
Based on on Tuesday's closing, Pavilion REIT's market capitalisations stood at RM3.63 billion, Sunway REIT RM3.59 billion and CMMT at RM2.82 billion.
"By injecting the Mid Valley Megamall and The Gardens Mall into a REIT, we can unlock the value of the assets and provide more value to shareholders," said Robert Tan, IGB Corp's group managing director.
With the enlarged war chest, some quarters anticipate that IGB Corp may be on an acquisition trail to acquire assets abroad.
"The global economic climate has hit some countries hard, creating an opportunity for mergers and acquisitions," Tan replied when commenting on the usage of the cash pile.
IGB REIT has committed to pay out 100% of earnings in 2013 and 2014 after which, dividend payouts will be more than 90%.
At the AGM on Tuesday, IGB Corp and KrisAssets received shareholder approval to dispose of the two malls to IGB REIT for a consideration of RM4.61 billion of which RM1.21 billion will be in cash and the rest in shares.
Mid Valley Megamall, with a book value of RM2.36 billion, will be sold with a 45.8% gain of RM1.08 billion on disposal while The Gardens Mall with a book value of RM940.98 million will be sold for a 24.4% gain of RM230 million.
The proceeds of the disposals will be distributed to KrisAssets' shareholders in RM2.43 cash per share and 5.24 IGB REIT shares for each KrisAsset share.
Once the disposal is completed and the proceeds distributed, KrisAssets will be liquidated and deregistered, said IGB Corp's group chief financial officer, Chai Lai Sim.
Post-listing, IGB Corp's stake will hold a direct 51% equity stake in IGB REIT, which will issue 670 million new units or 19.7% of its total share capital.
This story appeared in The Edge Financial Daily on June 27, 2012.
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