E&O to merge with property arm

E&O Property minority shareholders have three options

PETALING JAYA: Eastern & Oriental Bhd (E&O) has proposed to merge with its 63%-owned subsidiary E&O Property Development Bhd (E&O Prop) in a share-swap deal valued at RM609mil.

“The streamlining of E&O and E&O Prop into a single listed entity, as opposed to current two-tier listing, will provide a strengthened base for sustainable value creation and long-term growth for the entire group,'' the company said in a statement to Bursa Malaysia yesterday.

Under the scheme of arrangement submitted by AmInvestment Bank Bhd yesterday, E&O will offer E&O Prop's minority shareholders 1,100 E&O shares for every 1,000 shares held in E&O Prop.

The new E&O shares will be issued for about RM2.27 each, involving the issuance of 268.2 million new shares.

Trading in the shares in both E&O and its unit was suspended yesterday at RM2.40 and RM2.45 respectively.

The latest proposal by E&O is the Penang-based investment holding and hotel operator's second attempt in less than three years to delist its property development arm.

In May 2005, E&O made a voluntary general offer for E&O Prop, but the plan to de-list the company was rejected by minority shareholders later that year.

Other than the share-swap proposal, E&O Prop's minority shareholders are also given two other options that involve cash payments for their holdings.

“The company will make available/source for a cash pool of approximately RM213mil,'' and for the purpose “a notional amount of RM2,500 per 1,000 E&O Prop shares will be used,” E&O said.

E&O Prop's minority shareholders can also elect to receive a combination of cash and shares for their E&O Prop holding, on the basis of 715 E&O shares and RM875 cash for every 1,000 E&O Prop shares.

The total cash payment, assuming full acceptance via this method, would amount to RM213.34mil.

Full cash settlement would be offered to E&O Prop minority shareholder from the “excess cash” available after the two options, and the final amount “will be determined by the board as it may in its absolute discretion think expedient and in the best interest of the company”.

The E&O board, however, was of the view that the share-exchange offer was in the best interest of E&O Prop shareholders as it would allow the enlarged group to have a cash reserve of “over RM200mil” which it could use to expand its real estate business.

E&O Prop has appointed OSK Investment Bank as independent adviser for its minority shareholders for the proposed share swap.

Meanwhile, E&O and its property arm said in separate announcements yesterday that they had recorded improved performance for their second quarter ended Sept 30.

E&O's net profit for the three months swelled 49% to RM14.72mil against RM9.9mil a year earlier, while revenue rose to RM168.5mil from RM121.5mil.

Its net profit for the six months was RM30mil versus RM20mil previously. E&O Prop's net profit climbed 19% for the second quarter to RM24.5mil against RM20.6mil a year earlier.

The half-year net earnings shot to up RM60mil, or 9.14 sen per share, compared with RM40.9mil, or seven sen per share, in the previous corresponding period.

By The Star (By Izwan Idris)