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Wednesday, March 7, 2012

CEO to park 73 of his privately-owned properties worth RM1.1bil into Dijaya

Tan (left) shaking hands with RHB investment Bank officer-incharge Mike Chan. RHB and AmInvestment are joint advisers for the amalgamation exercise. With them are AmInvestment MD for corporate and institutional banking Pushpa Rajadurai and Dijaya deputy MD Dickson Tan Yong Loong. – Starpix/KAMARUL ARIFFIN

PETALING JAYA: Tan Sri Danny Tan Chee Sing, the substantial shareholder and group chief executive officer of Dijaya Corp Bhd, will inject 73 of his privately-held properties with a market value of RM1.1bil for approximately RM948.7mil into Dijaya Corp, making it one of the largest related party transactions in Malaysia.

In a press conference yesterday, Dijaya officials said that the proposed amalgamation exercise would be satisfied by RM250mil cash and the balance via the issuance of a 10-year 2% coupon Redeemable Convertible Unsecured Loan Stocks (RCULS), with a staggered conversion price range of RM1.30 to RM2.50 over a 10-year period.

There would also be a renounceable rights issue of up to 491.3 million new shares of RM1 each, which Tan has committed to take up at least RM250mil, which is also the minimum scenario of the proposed exercise.

This effectively means that Tan would be injecting cash of RM250mil back into the company.

The chances of Tan triggering a general offer threshold is remote as there are clauses which limit the quantity of RCULS to be converted depending on profits made by Dijaya over the next 10 years.

Dijaya's renounceable rights issue of up to 491.3 million new shares of RM1.00 each is priced at an issue price of RM1.20 per rights share, together with a bonus issue of up to 122.83 million new shares of RM1 each in Dijaya.

Shareholders are entitled to four rights shares for every five existing Dijaya shares held and one bonus share for every four rights shares subscribed.

“These proposed acquisitions and corporate exercises will need to be approved by shareholders of Dijaya and the Securities Commission. An independent adviser with the purpose of protecting minorities, would be appointed,” said Astramina Advisory managing director Wong Muh Rong, who is also Dijaya's joint adviser for the exercise.

Presently, Tan directly owns 30.5% of Dijaya, and indirectly owns 17.86% through Impeccable Ace Sdn Bhd and 18.26% through Golden Diversity Sdn Bhd.

Under a maximum scenario, Tan's shareholding in the company would remain at 30.5%. Under a minimum scenario, his shareholding will increase to 42.67%.

Wong said that chances of a mandatory general offer was remote, as offer letters to underwrite Dijaya's shares under a minimum scenario had already been received from RHB Bank Bhd and AmInvestment Bank Bhd.

Meanwhile, the properties to be injected are a mixture of land and property investments in the Klang Valley, Penang, Johor and Sabah which would see Dijaya's landbank increase to 870 acres from 802 acres, and its total lettable area increase from 550,000 sq ft to 1.4 million sq ft. “Some of these landbank are in prime locations such as Jalan Bukit Bintang, Jalan Conlay and SS2 in the Klang Valley, and Macalister Road in Penang,” Dijaya managing director Datuk Tong Kien Onn told a press conference here.

The investment properties are already tenanted out offering average yields of 8%.

The injection of new assets would see Dijaya's gross development value (GDV) increase to RM37bil from RM30bil.

Wong added that Tan had been acquiring these parcels of land and investment properties for the last 20 years.

The indicative market value of the land held for development is RM720mil while the land held as investment properties are valued at RM384mil, as appraised by independent professional valuers, CH William, Knight Frank, CBRE and Rahim & Co.

“As this stock was previously never on the radar screen of investors, I would say that this deal is more positive than negative. Firstly, it improves the market capitalisation and liquidity of the company. A GDV of RM37bil puts it right up there with some of the biggest property players in the country,” said a property analyst

“While its true that not all of the assets purchased are earnings accretive apart from the investment properties, the new landbank makes them a lot bigger and streamlines the whole group. Size-wise, Dijaya has grown quite significantly,” said the analyst.

Meanwhile, for long-term capital requirements of the group, Dijaya proposed a debt funding via the issuance of up to RM500mil guaranteed commercial paper/medium term notes programme (CP/MTN) with an option to issue detachable warrants.

RHB Bank Bhd and AmBank Bhd are the guarantor banks and RHB Investment Bank Bhd and AmInvestment Bank Bhd are the appointed joint lead arrangers and joint lead managers for the proposed CP/MTN programme.

Astramina Advisory is the appointed financial adviser for the proposed CP/MTN programme.

Dijaya would abort its proposed private placement that was previously announced on Aug 18 2011.

According to Dijaya's announcement to Bursa, the proposed acquisitions are aimed at amalgamating the group's assets with those held by the major shareholders which would ultimately mitigate potential conflict of business interests between Dijaya and its major shareholders whilst at the same time help transform it into a single real estate flagship with greater access to larger landbank for future developments and long-term real estate investments as well as greater economies-of-scale.

“The introduction of additional long-term real estate investments will provide the group with a more stable and sustainable income streams arising from rental income,” said Dijaya in its announcement.

Astramina Advisory, RHB Investment Bank and AmInvestment Bank have been appointed as the joint advisers for Dijaya for the amalgamation exercise.

By The Star

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