KUALA LUMPUR (Feb 5): Sime Darby Property Bhd (Sime Property) has proposed to take full control of loss-making Malaysia Land Development Co Bhd (MLDC) via a selective capital reduction and repayment exercise, for RM2.46 million in cash or 50 sen per MLDC share.
Sime Property is the property arm of conglomerate Sime Darby Bhd, while MLDC is a privately-held development outfit.
MLDC owns Genting View Resort, which is located in Genting Highland. The principal activities of its subsidiaries are mainly hotel resort operations, provision of management services and property development. MLDC has not undertaken any property development activities since 1995.
In a statement, Sime Darby Property Development Services head Datuk Wan Hashimi Albakri said the move comes as a way for Sime Property and three other parties acting in concert (PACs), to assume control over the direction of the non-publicly listed company, whose financial performance has been inked in red over the past five years.
The three PACs are Sime Property's chief financial officer Ho Ee Lay, head of property II Mohd Salem Kailany and corporate services head Kamarul Ariffin Abdul Samad. Each of them hold 0.01% stake in MLDC, with Sime Property owning 50.7%. Together, they hold a controlling stake of 50.73% or 5.07 million shares in MLDC.
The proposed cash consideration of 50 sen per MLDC share, was reached after taking into account MLDC’s net liabilities of RM4.67 million per share as at June 30, 2014.
“The financial performance of MLDC has not been satisfactory, wherein MLDC and its subsidiaries have recorded consecutive net losses for the past five years,” said Wan Hashimi.
“In addition, MLDC is currently in a net liabilities position for the latest audited financial year ended June 30, 2014,” he added.
He said MLDC’s gross profit margin of 48% for financial year end June 30, 2010, had declined to a gross loss margin of 0.3% for financial year end June 30, 2014.
MLDC had secured loans from Sime Property to continue operations, but due to its weak financial position, the company was unable to service the interest on the loans, Wan Hashimi said.
“In view that MLDC Group has been unable to establish itself as a sustainably profitable and financially self-sufficient company, the selective capital reduction exercise offers an opportunity for entitled shareholders to exit the company,” he said.
“In addition, MLDC has not been paying dividends for the last five financial years, since financial year end June 30, 2010.
“We believe the private ownership of MLDC will accord us greater flexibility to execute necessary decisions, including embarking on future plans for MLDC in a more efficient manner,” he added.
MLDC is required to refrain from undertaking any material commitment to acquire or dispose assets, conducting a capital raising exercise, passing any resolutions in general meetings, or changing provisions in its memorandums, among others.
The proposal requires an approval from shareholders at an extraordinary general meeting (EGM), by way of a special resolution.
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