PNB ready to help finance SP Setia acquisition of I&P

KUALA LUMPUR: Permodalan Nasional Bhd (PNB) is ready to support SP Setia Bhd in providing the necessary capital to fund the RM3.5 billion to RM3.75 billion price tag it will have to fork out for I&P Group, to make sure the deal goes through, its president and group CEO Datuk Abdul Rahman Ahmad said.
The group is still deliberating on how to effectively finance the purchase of I&P, which will create one of the largest property development companies in Malaysia and the region. SP Setia had about RM4 billion of cash in its coffers as at end of Dec 31, 2016.
“As a long-term investor, we see this as another opportunity for PNB to enhance shareholders’ value and increase future dividend yields for our unitholders,” he said.
SP Setia expects to fund the proposed acquisition via a combination of equity, internally generated funds and borrowings. The final purchase price will be determined after considering the due diligence results, audited net asset value of I&P of RM3.16 billion as at Dec 31, 2016, on-going projects and investment properties of I&P.
Last Friday, SP Setia, PNB and Amanahraya Trustees Bhd entered into a non-binding memorandum of intent to start negotiations on SP Setia’s proposed acquisition of I&P.
Post-acquisition, the enlarged entity will have a combined landbank of close to 10,000 acres with a total gross development value of RM122 billion and total revenue of RM5 billion.
SP Setia and I&P currently have 5,218 acres and 4,263 acres of undeveloped land respectively in the Klang Valley, Johor Baru, Penang and Sabah.
SP Setia president and CEO Datuk Khor Chap Jen said I&P has a strong balance sheet, with very low debt level, which is an excellent platform to facilitate future growth and execution.
He said the proposed acquisition would enable S&P to fast track its expansion plan and possibly achieve its RM18 billion market capitalisation earlier than the 2021 target. SP Setia’s market capitalisation currently stands at RM10 billion.
“For now, our RM4 billion sales target stays. This acquisition will take a few months. By the time it’s completed, it will be towards the end of the year,” he said, adding that it hopes to finalise details of the transaction within a few months.
Khor said the proposed acquisition will also provide the group with a ready talent pool with complementary skill sets, at a time when talent in the market is scarce. SP Setia has some 1,800 staff while I&P has about 300 staff.
PNB Group chairman Tan Sri Abdul Wahid Omar, who is also I&P chairman, said the proposed transaction is in line with PNB’s strategic plan to transform the performance of its strategic and core companies as well as rationalise and enhance its property investments.
“We always believe in respective teams focusing on their respective areas and leveraging on each others’ strengths. For example, SP Setia can add value to I&P by dedicating some sales and marketing resources to I&P. Likewise, there are some areas where SP Setia will be able to leverage on, such as the management strengths of I&P,” he said.
SP Setia via its wholly owned subsidiary KL East Sdn Bhd also entered into a conditional sale and purchase agreement with Seriemas Development Sdn Bhd to buy a 342.5-acre site in Bangi for RM447.58 million or RM30 per square foot (psf). The purchase includes profit sharing of up to RM3 psf from the development of the land known as Bangi Estate, into a mixed project with a GDV of RM2.74 billion.
Seriemas Development is a 60%-owned subsidiary of PNB Development Sdn Bhd, which in turn is wholly owned by PNB.