UEM to take control of Sunrise for RM1.4b

UEM Land Holdings Bhd, the country's largest property developer by market value, plans to take control of rival Sunrise Bhd in a RM1.4 billion deal as it aims to be one of the biggest players in the region.

"That's our vision, to have our own version of CapitaLand," said UEM Land managing director and chief executive officer Datuk Wan Abdullah Wan Ibrahim in a media conference in Kuala Lumpur today.

Singapore’s CapitaLand is one of Asia’s biggest property developers with presence in over 20 countries.

The deal, which confirmed a Business Times report on Thursday, values Sunrise at RM2.80 a share, an 11 per cent premium to Sunrise's last traded price of RM2.52.


Deputy Chief Executive Officer Employees Provident Fund (EPF) Shahril Ridza Ridzuan and Group Managing Director/CEO of UEM Group, Datuk Izzaddin Idris at the press conference today. Pix by Mohd Khairul Helmy

According to UEM Land, 77 per cent owned by UEM Group Bhd, the deal will immediately boost earnings. It also allows UEM Land to take part in Sunrise's development in the Klang Valley. It will also strengthen UEM Land’s presence abroad.

"For example, we have a very nice piece of land in South Africa, it's a very strategic location, right at the harbour front. And now, we have the expertise to do it.

“Previously, it's quite daunting to think of I am going to build another Mont Kiara (in South Africa), but who is going to do it? Who are we going to send there?' Now, we can deploy the entire (Sunrise) team," said Wan Abdullah.

Major Sunrise shareholders, led by Datuk Tong Kooi Ong, Datuk Allan Lim and Tan Sri Tan Chee Sing, who collectively hold a 40.3 per cent stake, have agreed to UEM Land's offer. But UEM Land needs to have more than 50 per cent of Sunrise for the takeover to happen.

If more than 75 per cent of Sunrise shareholders accept the offer, UEM Land plans to take Sunrise private.

Tong, who was also present, expects the deal to be well received by investors even though it may mean a delisting of another entity on Bursa Malaysia.

"It will excite the market, because now we will actually have a very large property developer in Malaysia, a company that has lots of land bank, lots of potential, the right backing, a company that now has a nice brand and expertise.

“I think it will get a lot of foreign institution interests into the stock. Therefore I think it is positive for the capital market," said Tong.

The offer will be satisfied in one of two ways. The first option, known as the share alternative, is the offer of new UEM Land shares priced at RM2.10 each.

The second option, known as the cash conversion method, involves the issue of redeemable convertible preference shares at RM1 each.

After the deal is completed, scheduled at the end of the first quarter next year, UEM Group's shareholding in UEM Land will fall to between 56 per cent and 65 per cent, depending on the number of shares or preference shares issued.

Major shareholders led by Tong will also have stake of between 6 and 11 per cent in UEM Land.

But the parties admitted that there are concerns over the possible clash of corporate cultures.

"Mergers are clearly beyond P&L (profit and loss)... It was a major issue when this (the deal) was contemplated, but I think we have spent considerable amount of time thinking about this issue and thinking through this issue.

"What we will try to do is we'll try to allow the structure and the people in the two organisations to go parallel and not to force a merger. And then over time, to allow the interaction among the two parties, to feel comfortable with each other first, then crossing each other's boundaries," explained Tong.

The Sunrise brand will also be maintained.

"We will retain the Sunrise brand, because it is of great value. We don't intend to butcher it, certainly," said Wan Abdullah.

By Business Times