The Verge

KUALA LUMPUR (May 6): DRB-Hicom Bhd’s divestment plan to pare down high borrowings seems to have hit a snag.

The conglomerate announced to Bursa Malaysia yesterday that together with the minority shareholders, DRB-Hicom has aborted the sale of the Singapore-based property investment firm Corwin Holding Pte Ltd to Evolutyon Real Estate Investment Holding Pte Ltd.

The divestment would have fetched S$317 million (RM965 million) cash. DRB-Hicom owns a 90% equity stake in Corwin Holding, meaning the conglomerate would have received an estimated RM870 million cash, should the deal have gone through.

The cash proceeds of RM870 million would have come in handy to pay off some debts. The sum is slightly more than 10% of its total borrowings of RM7 billion as at Dec 31, 2015.

The long-term borrowings of the conglomerate, which wholly owns national carmaker Proton Holdings Bhd and controls substantial equity stake in Pos Malaysia Bhd and Bank Muamalat Malaysia Bhd, stood at RM4.62 million and short-term liabilities were at RM2.39 billion as at end-2015.

Its balance sheet as at Dec 31, 2015 showed that the group had banking assets of RM5.58 billion available for sale. DRB-Hicom was in merger talks with the Malaysia Building Society Bhd but it did not bear fruit. The group wanted to sell a 30% stake in Bank Muamalat, to trim its shareholding to 40% from 70% in the Islamic bank.

DRB-Hicom said that it had sent a termination notice to Evolutyon informing that the share sale agreement signed last December had been officially terminated. “The termination was due to the inability of the purchaser to fulfil its contractual obligations on the agreed completion date,” it added.

To recap, DRB-Hicom announced in December last year that its indirect unit Hicom Megah Sdn Bhd together with Corwin’s minority shareholders, namely Mohamed Mustafa & Samsuddin Co Pte Ltd and BI Distributors Pte Ltd, had entered into a share sale agreement to sell Corwin to Evolutyon.

In the previous announcement, DRB-Hicom said it expected to net a disposal gain of RM427.47 million, which was expected to reduce its gearing ratio to 0.83 times from 0.91 times as at March 3, 2015.

“The proposed disposal allows the group to unlock the value of its investment in Corwin based on the current market value of the property,” it said in the then filing.

DRB-Hicom said the disposal was expected to increase the earnings per share of DRB-Hicom for the financial year ended March 31, 2016 by about 22.11 sen, assuming the full repayment of bank borrowings by Corwin of approximately S$85.52 million.

Corwin owns a leasehold property that is an eight-level shopping mall comprising six storeys and two basement levels known as The Verge in Serangoon Road, Singapore.

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This story first appeared in TheEdgeProperty.com pullout on May 6, 2016, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com here for free.

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