This article first appeared in The Edge Financial Daily on August 2, 2017 - August 8, 2017

KUALA LUMPUR: Permodalan Nasional Bhd (PNB) is buying the remaining 40% stake in Seriemas Development Sdn Bhd (SDSB) it does not own from Sime Darby Bhd for RM625 million cash.

PNB currently holds a 60% stake in SDSB via its wholly-owned subsidiary PNB Development Sdn Bhd. PNB is also a substantial shareholder of Sime Darby, with a 6.06% stake.

In a filing with Bursa Malaysia yesterday, Sime Darby announced that its wholly-owned property arm Sime Darby Property Bhd has signed a share sale agreement (SSA) with PNB Development for the disposal. The SSA is expected to be completed within three months.

Sime Darby said proceeds from the disposal will mainly be used for general corporate purposes and working capital including repayment of borrowings.

Sime Darby is expected to record a gain on disposal (after non-controlling interests) of approximately RM305 million. Its original cost of investment in SDSB is RM449 million.

Sime Darby said the disposal consideration represents a discount of 39.4% to the realisable net asset value (RNAV) of SDSB of RM1.23 million as at March 31, 2017.

“The discount of 39.4% falls within the range of discount to RNAV of precedent transactions involving Malaysian property development companies of between 26.1% and 45.96%,” it added.

SDSB owns 11 parcels of undeveloped land, three parcels of land with current ongoing developments, as well as two malls in Kota Seriemas, Nilai, and two hotels in Morib — both located in Negeri Sembilan.

Based on its audited financial statements for the financial year ended Dec 31, 2016, SDSB registered a net profit and net assets of RM40.2 million and RM1.4 billion respectively.

Sime Darby said the proposed disposal is in line with its strategy to unlock value through monetisation and opportunistic divestments, while enabling the group to reduce its borrowings via the proceeds from the proposed disposal.

Barring any unforeseen circumstances, the proposed disposal is expected to be completed before the end of 2017.