The Employees Provident Funds (EPF) benefits by having a strategic entrepreneur partner to drive MRCB’s property and construction business, it said in a statement to KiniBiz in response to queries. “The model is similar to that of SP Setia or Mah Sing, where an entrepreneur holds a significant stake and works on behalf of all the institutional and minority shareholders,” the fund added.
The full statement:
The Employees Provident Fund (EPF) would like to make a clarification regarding its stand on the deal between Malaysian Resources Corp Bhd (MRCB) and Nusa Gapurna Development Sdn Bhd.
The EPF holds 40 percent in Nusa Gapurna, through a co-investment in the properties that was undertaken in 2011. By injecting the assets into MRCB, the EPF will continue to hold an approximately 40 percent economic stake in the same assets but with the advantage of having liquid shares as opposed to an illiquid investment in shares of a private company.
With the departure of Mohamed Razeek Md Hussain from his position as MRCB chief executive officer, the Board of Directors of MRCB had decided that MRCB would best expand with an entrepreneurial manager at the helm.
Accordingly, discussions were held with the Gapurna group, who are one of the largest privately held developers, and a party that was already familiar to the MRCB board from their partnership on the Shell HQ development.
Negotiations took a period of several months to be concluded as the EPF and the MRCB board wanted to ensure that all the advisors and valuers had sufficient time to assess the assets and businesses that were to be acquired.
Commercial discussions also took longer than expected as the independent board members of MRCB wanted a fair price for the issuance of the new MRCB shares and warrants, which is reflected in the proposed issuance price of RM1.55 per share and RM2.30 warrant strike price, which are substantial premiums to market and better reflect the intrinsic value of MRCB.
With regard to the EPF, it benefits by having a strategic entrepreneur partner to drive MRCB’s property and construction business. The model is similar to that of SP Setia or Mah Sing, where an entrepreneur holds a significant stake and works on behalf of all the institutional and minority shareholders. The EPF plans for the long term and believes that this partnership between MRCB and Gapurna will be an excellent combination of MRCB’s expertise in urban regeneration and Gapurna’s entrepreneurial drive.
The ultimate combination for the EPF is economically neutral as it had a 40 per cent stake in both businesses and will continue to have approximately the same stake in the combined entity going forward. Hence, it will abstain from the extraordinary general meeting and leave it to the other shareholders to decide on the deal.