Jerneh Asia's Sabah deal off?

KUALA LUMPUR: Cash-rich Jerneh Asia Bhd's proposal to buy a Sabah-based developer is said to be out the window as definitive terms could not be agreed upon despite extensive discussions, a source said, opening up the possibility of a capital repayment to shareholders, if necessary approvals are granted.

Both Jerneh and Generasi Cipta Sdn Bhd, the controlling shareholder of Sagajuta (Sabah) Sdn Bhd — whose flagship project is the 1Borneo mixed development in Kota Kinabalu with RM1.2 billion gross development value (GDV) — have "mutually agreed to terminate discussions", the source added. This could not be officially confirmed at press time.

When contacted, a Jerneh spokesperson declined to comment, saying that an update announcement will be made "soon" to Bursa Malaysia.

When extending the exclusivity period for talks by three months to Oct 20 in July, Jerneh had said due diligence in relation to the proposed acquisition was on-going. Talks with Generasi Cipta were intended to be an essential part of its plan to regularise its Practice Note 16 (PN16) and PN17 conditions, Jerneh said in an April 21 statement. Generasi Cipta owns 60% of Sagajuta.

It could not be immediately ascertained whether Jerneh — which is without a core business after selling its 80% stake in Jerneh Insurance Bhd to ACE INA International Holdings Ltd for RM523.2 million in December 2010 — is eyeing any other acquisition or will continue with its earlier stated plans to return all cash to shareholders and wind up the company if the deal falls through.

In its circular to shareholders dated June 13 pertaining to a proposed dividend distribution, however, Jerneh said it was the company's intention "to distribute as much cash as possible to shareholders now in the form of dividend and later on, in the form of capital repayment as part of the proposed restructuring scheme, or full capital repayment in the event the proposed acquisition [of Sagajuta] does not materialise".

In the same circular, it illustrated that a capital repayment could be between RM1.36 and RM1.41 per share. The pro forma numbers took into account net assets being disposed of for RM716.8 million, and audited net assets as at Dec 31, 2010 after deducting about RM460 million in dividend payments.

Jerneh had on Aug 4 paid out a final dividend of eight sen per share and a special cash dividend of RM1.81 per share.

Its shares added one sen to close at RM1.29 on Thursday.

An analyst said the cancellation of the deal, if true, would not have any impact on shareholders of Jerneh, as it should not affect its capital repayment exercise.

"The exercise was meant to give Sagajuta a clean backdoor listing vehicle via Jerneh," he said.

"The original exercise was structured to benefit minority shareholders (of Jerneh) by returning cash to them first and then giving the takeover party a clean shell for their assets. This was unlike many other deals in the past where assets were pumped into cash-rich entities to take out the money," he added.

"Almost all of Jerneh's cash would have been distributed to its shareholders under the original plan anyway. The only possible and very mild negative is that they (Jerneh's shareholders) would not be able to participate in a possible restricted offer or placement of shares in the post-restructured Jerneh (which is essentially Sagajuta)," he added.

Jerneh's June 13 circular to the shareholders illustrated plans to have all cash in the company returned to shareholders, except for between RM5 million and RM7.1 million to be retained for the proposed acquisition of Sagajuta and to defray other related expenses.