KUALA LUMPUR (Oct 27): Ekovest Bhd has entered into binding heads of merger agreement (HOA) with its major shareholders, Tan Sri Lim Kang Hoo and another sister company, Knusford Bhd, as part of a proposed consolidation exercise to streamline the tycoon’s shareholdings in a group of companies.

Ekovest told Bursa Malaysia on Friday that it is disposing of its entire stake in Ekovest Construction Sdn Bhd (ECSB) to Knusford Bhd for RM450 million. 

Knusford, on the other hand, will fund the ECSB acquisition through the issuance of new ordinary shares in Knusford at the proposed issue price of 60 sen per new Knusford share.

In explaining the rationale of the proposed merger, Ekovest highlighted that the proposed ECSB-Knusford merger serves to consolidate the construction and construction-related businesses currently owned and controlled by Kang Hoo through Ekovest and Knusford.

“The proposed Knusford-ECSB merger is also aimed at eliminating many of the existing recurrent related party transactions between the two groups moving forward.

“Further, the combination of both construction divisions of Ekovest and Knusford under one roof will also result in synergistic benefits (ie consolidation of resources, workforce and technical expertise of both groups) and further strengthen the order book, financial position and prospects of the combined construction group,” it said. 

Meanwhile, in a separate local bourse filing, Ekovest highlighted it had also entered into a HOA with Kang Hoo to explore and negotiate the purchase of a 70% stake in Credence Resources Sdn Bhd (CRSB) for a purchase consideration of RM1.15 billion.

CRSB presently holds 63.13% equity interest in Iskandar Waterfront Holdings (IWH), which in turn holds 34.29% equity interest in Iskandar Waterfront City (IWCity).

The vendors of CRSB are to be paid via the issuance of new ordinary shares in Ekovest at the proposed issue price of 60 sen per new Ekovest shares.

CRSB's shareholders are Kang Hoo (90%), Ekovest managing director Tan Sri Lim Keng Cheng (5%), and 
executive director Datuk Lim Hoe (5%).

“The proposed [CRSB] acquisition provides an opportunity for Ekovest to expand its property development segment vide access to the land bank of [CRSB] and its group of companies (Credence Group) (including those held through IWH and IWCity) of approximately 4,212 acres which are strategically located in Johor.

“The expansion of the Ekovest Group’s land bank in Johor will enable the Ekovest Group to tap into the potential opportunities that may arise from the various government incentives to develop Johor into another financial centre of the country. 

“The rapid infrastructure developments such as the Rapid Transit System Link may also benefit the property sector in Johor. Accordingly, these lands have potential for capital appreciation, which is expected to augur well for the Ekovest Group moving forward,” it said. 

Separately, Ekovest had entered into binding term sheets for Mohamad Nor Hamid and Lee Hun Yeung, who are shareholders of Danga City Mall Sdn Bhd (DCMSB), and with Cheong Meow Yen and Desa Sinarmas Sdn Bhd, the shareholders of Khazanah Melati Sdn Bhd (KMSB).

DCMSB own a six-storey mall called Danga City Mall and expo centre which occupies 6.18 acres of freehold land in Johor Bahru while KMSB owns 9.64 acres of leasehold land in Johor Bahru. 

Ekovest will acquire the properties from the companies for RM310 million, subject to valuation by an independent valuer, which will be satisfied by the issuance of new ordinary shares in the company at 60 sen per share.

Notably,  DCMSB has a total issued share capital of RM86.42 million comprising 350,000 ordinary shares and 86,071,000 redeemable preference shares which are held by Kang Hoo and companies related to him.

Meanwhile, Kang Hoo and companies related to him had extended a loan of an unspecified amount to KMSB, which the company has settled at the time of the announcement.

Last month, Kang Hoo proposed to streamline its businesses under an enlarged Ekovest. Lim is a major shareholder of Ekovest Bhd, Knusford Bhd, IWH and IWCity.

Astramina Advisory Sdn Bhd has been appointed as the financial adviser for Ekovest for both acquisitions and corporate exercises. 

Shares in Ekovest closed one sen or 2.04% lower to 48 sen, giving it a market capitalisation of RM1.42 billion. 

Meanwhile, shares in Knusford ended two sen or 2.31% lower to 84.5 sen, valuing the company at RM84 million.