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MRCB-Gapurna poser

KUALA LUMPUR: The land deal between Malaysian Resources Corp Bhd (MRCB) and Nusa Gapurna Development Sdn Bhd (NGD) will go on despite Selangor State Development Corp's (PKNS) intention to stay out of the deal and to acquire the remaining 70% interest in PJ Sentral Development Sdn Bhd.

PKNS has a 30% stake in PJ Sentral Development, one of the companies that MRCB is poised to acquire under its asset acquisition transactions with NGD.

The state-owned developer was served a "drag along" notice by Gapurna on April 23, which compelled the former to cooperate in the sale of PJ Sentral Development to MRCB.

"The deal will not collapse just because PKNS wants to buy back the 70% interest in PJ Sentral (from NGD)," said an executive familiar with the deal.

"The amended supplemental agreement between MRCB and NGD makes room for a deferment in the implementation of the proposed acquisition of 70% in PJ Sentral Development, should the need arise," said the executive.

Over the weekend, The Edge Weekly reported that PKNS had sent out an official letter a week earlier stating that it wanted to stay out of the deal. This was later confirmed by the management of MRCB, according to UOB KayHian Research's analyst report released yesterday.

On June 3, MRCB-NGD amended their supplemental agreement to provide a leeway for MRCB to proceed with acquisition of the other companies ahead of the PJ Sentral Development, if necessary.

According to the executive, PKNS' right to refuse the sale of PJ Sentral Development was nullified when the state-owned developer failed to exercise its rights before the "drag along" notice was served by Gapurna on April 23.

Nevertheless, MRCB would still have to fulfil all precedent conditions attached to the proposed acquisition of the other companies.  

Under the deal, MRCB has proposed to acquire from NGD the 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 and Puncak Wangi Sdn Bhd. The total consideration for this portion is RM459 million, to be satisfied with cash and MRCB shares.

The deal also includes MRCB buying Gelanggang Harapan Construction Sdn Bhd (GHC) from Mohd Imran Mohamad Salim, Datuk Mohamad Salim Fateh Din and Datin Yasmin Mohamad Ashraff, and Gapurna Global Solutions Sdn Bhd (GGS) from Mohd Imran Mohamad Salim and Hanif Ahmad Nisar Ahmad.

The entire deal will come up to RM729 million, which MRCB will pay via a combination of cash of RM111 million and the issuance of up to 398.71 million new MRCB Shares at an issue price of RM1.55 per share.  MRCB will also issue up to 113.92 million detachable warrants on the basis of two free detachable warrants for every seven new shares issued.

The amended clause in the supplemental agreement states that the completion of the sale and purchase of the shares of P.J Sentral Development need not necessarily occur simultaneously with the proposed acquisitions of NGD's identified subsidiaries, namely Gapurna Builders Sdn Bhd (GBS), Gapurna Land Sdn Bhd (GLS)and Puncak Wangi Sdn Bhd.

It does say that: "(a) The parties agree that the Proposed Acquisitions shall be completed only if all conditions precedent in respect of the Proposed Acquisitions are fulfilled and to the greatest extent possible, Completion of the Proposed Acquisition of the NGD Identified Subsidiaries other than P.J Sentral Development pursuant to the terms and conditions of this Agreement shall take place concurrently with the completion of the other Proposed Acquisitions pursuant to the terms of the other relevant Definitive Agreements."

The parties further agree that they may complete the sale and purchase of the shares of P.J Sentral Development at the same time or after the completion of the proposed acquisition of Gelanggang Harapan Construction Sdn Bhd (GHC),and proposed acquisition of Gapurna Global Solutions Sdn Bhd (GGS).

Analysts say what makes PJ Sentral Development so attractive is its 12-acres of prime commercial land located in Petaling Jaya that has an estimated gross development value of close to RM3 billion. It has received approval for the construction of office buildings and a hotel.

The land also forms part of the PJ Sentral Garden City, a project under the Economic Transformation Programme that is poised to be the new green business central district of Selangor.

PJ Sentral Development was privatised to NGSB when the Selangor government was under the then Barisan Nasional. However, the current government prefers for property development to be done by the state entity itself rather than be privatised.

As for the other companies in the proposed acquisition, their land banks are located in Subang Jaya (3.2 acres) and Jalan Kelang Lama (17.63 acres). MRCB shareholders will vote on the proposed deal on June 20.


This article first appeared in The Edge Financial Daily, on June 18, 2013.

 

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