Tropicana's Tan in land deal

KUALA LUMPUR: Temasya Cergas Sdn Bhd, a private vehicle linked to Tan Sri Danny Tan, has entered into a non-binding MoU with Singapore-listed Albedo Ltd, as the property tycoon seeks a presence on the Singapore Exchange (SGX).

The MoU would see Albedo, a company that trades in steel and other raw materials, acquire five parcels of land totalling 762 acres (308.37ha)  located in Iskandar Malaysia, Johor from Temasya Cergas.

In exchange, Albedo will allot and issue new ordinary shares to Temasya Cergas, which could result in a potential reverse takeover, the former said in a statement.

Tan, the younger brother of high-profile Tan Sri Vincent Tan of the Berjaya group, is the founder and group CEO of Torpicana Corp Bhd, formerly known as Dijaya Corp Bhd.

Tan may be seeking a presence on SGX, possibly due to strong Singaporean investor interest in Iskandar, those familiar with the tycoon said.

According to an executive familiar with the deal, the valuation of the five parcels of land is worth about RM3 billion.

The lands acquired by Albedo are located in Gelang Patah, in the vicinity of Setia Eco Gardens and are to the north of Iskandar Malaysia's flagship B: Nusajaya development.

The parcels of land, measuring between 29 acres and 279 acres each, are slated for an integrated business park and a mixed-use commercial and residential development.

"Both parties will have to negotiate the terms before proceeding to a sale and purchase agreement (SPA)," said the executive, noting that the acquisition cost has yet been finalised.

Both parties are negotiating towards a SPA by Aug 30.

The proposed deal would benefit both parties as it comes at a time when there is softening demand in the steel-related industry, said an analyst.

According to a filing with SGX, Albedo said the number of consideration shares and the issue price will be determined by both parties upon signing the SPA.

Albedo said the rationale behind the proposed acquisition was the intense competition and the softening of customer demand for trading and distribution businesses of steel-related raw materials and consumables that have eroded the group's profit margins.

"The proposed acquisition will provide an opportunity for the company to venture into new business areas which have the potential for growth," it added, although the board expects Albedo's existing core trading businesses to remain challenging.

Albedo, founded in 1987, is an investment holding company that engages in the supply and distribution of industrial and engineering raw materials to the metals industry in Singapore and other parts of the world.

It has been loss-making since FY2009.

In March last year, Tropicana, then known as Dijaya, acquired 73 properties held privately by Tan for RM948.7 million, at a discount of 16% to their market value of RM1.1 billion. Some of these properties include prime land in the Klang Valley, Johor Baru, Penang and Sabah.

The purchase of assets by Dijaya was satisfied by RM250 million cash and the issuance of 10-year 2% coupon Dijaya redeemable convertible unsecured loan stocks , with a staggered conversion price range of RM1.30 to RM2.50.

To facilitate the exercise, Dijaya also proposed a rights issue involving up to 491.3 million new shares at an issue price of RM1.20, together with a bonus issue of up to 122.83 million new shares on the basis of four rights shares for every five Dijaya shares held and one bonus share for every four rights shares subscribed.

According to Tropicana's website, it has three future developments in Johor — Tropicana Danga Bay, Capri Residences and Oasis, and Tropicana Danga Cove.

This article first appeared in The Edge Financial Daily, on August 21, 2013.



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