KUALA LUMPUR (Apr 3): MMC Corporation Bhd will acquire the remaining 51% stake in Penang Port Sdn Bhd (PPSB) for a cash consideration of RM220 million in order to gain full control of PPSB.  

According to a filing with Bursa Malaysia, MMC Port Holdings Sdn Bhd, a wholly-owned subsidiary of MMC Corp, has entered into a conditional share sale and purchase agreement with Seaport Terminal (Johore) Sdn Bhd to acquire the remaining 37.5 million ordinary shares representing about 51% ordinary equity interest in PPSB for a cash consideration of RM220 million.

It added that the proposed acquisition is to enable MMC Corp to be in full control of PPSB and be in a position to determine its future strategic direction.

“This is in line with the initiative of MMC Group to make further strategic investments in one of its core business, Ports and Logistics division, to strengthen the group’s financial performance and position,” it said.

Seaport Terminal (Johore) is a wholly-subsidiary of Indra City Sdn Bhd, which is controlled by Malaysian tycoon, Tan Sri Syed Mohktar Al-Bukhary.  

PPSB is involved in operating, maintaining, managing and provision of the Penang Port facilities and other related services. The note filed with Bursa said that PPSB is currently undertaking a transformation programme to turn around the port to be more competitive and profitable.

“The transformation includes reducing operational costs, increasing port efficiency, providing additional services for cargo handling activities as well as continuous port infrastructure development in line with industry demand,” it said.

Key initiatives include gaining further market share in the cargo and transshipment segment, capturing untapped market potential, offering higher value-added activities and developing general cargo business.

The financial results of PPSB have also shown improvement with its earnings per share improving from 0.42 sen per share in financial year ended Dec 31, 2014 (FY14) to 19.38 sen per share in FY16. The filing with Bursa said that the improved financial results was due to the successful initiatives taken by PPSB.

It should be noted however that the valuation of PPSB has been arrived on the assumption that the ferry business will not be part of its business upon the completion of the proposed 51% acquisition.

One of the risk factors involved in the proposed acquisition is the non-completion of the disposal of ferry business as MMC Corp’s expectation of the financial performance of PPSB is not assured in the event the disposal was not completed.

The share sale and purchase agreement (SPA) is subject to the completion by PPSB of the disposal of the ferry business. It also needs to acquire written approval from Unit Kerjasama Awam Swasta of the Prime Minister’s Department (UKAS) and a written waiver from the Penang Port Commission (PPC) as well as lenders’ approval for the existing RM1.16 billion syndicated banking facilities granted to PPSB.

The SPA could be terminated if the conditions are not fulfilled or waived within the agreed timeframe.

The funding for the acquisition will be via a combination of internally-generated funds or borrowings, of which the proportion will be determined at a later stage.

The proposed 51% acquisition is expected to be completed by October 2017.

Recall that last August, MMC Corp had proposed the purchase of a 49% stake in PPSB for RM200 million. At that time, the acquisition was also subject to the disposal of the ferry business but the SPA eventually become unconditional and the acquisition was completed on March 27 this year.

At closing today, MMC Corp was unchanged at RM2.49 with 1.64 million shares traded, giving it a market capitalisation of RM7.6 billion.