KUALA LUMPUR (Sept 24): Magma Group Bhd (KL:MAGMA) said on Tuesday it is acquiring a 2.26-acre plot of land in the Persiaran Dutamas area of Kuala Lumpur from a company connected to its executive chairman and major shareholder Datuk Seri Lee Hock Seng, for RM80 million.

In a bourse filing, the hospitality group said its wholly-owned Magma Kiara Sdn Bhd has on Tuesday inked a conditional sale and purchase agreement (SPA) with Skyload Express Sdn Bhd for the proposed acquisition.  According to Magma, the land has received approval for mixed-use development, which will include serviced apartments and commercial spaces.

The acquisition is a related-party transaction as Hock Seng controls 44% of Skyload by virtue of his 80% interest in Empire Solaris Sdn Bhd, which owns 55% in Skyload. The other 45% in Skyload is held by former national badminton player Datuk Wira Lee Chong Wei, who is one of two directors in the company. The other director in Skyload is Magma's managing director Datuk Seri Thomas Liang Chee Fong.

Hock Seng also holds a 19.28% stake in Magma, including 6.54% via his wife Datin Seri Joanne Yew Hong Im.

The company plans to fund the acquisition through a combination of RM8 million cash and the issuance of 120 million new ordinary Magma shares, along with redeemable non-convertible preference shares (RPS). The new shares will be priced at 20.24 sen, based on Magma's five-day volume-weighted average market price prior to the SPA. The issue price of the RPS will be set at RM1 each to match the balance of the purchase consideration of RM47.71 million.

Post-acquisition and assuming full conversion of the RPS, Hock Seng's shareholding in Magma will rise to 28.35%, of which 5.8% would be held via his wife, and about 11.24% via SkyLoad. Chong Wei will emerge as a new substantial shareholder in Magma, with a 14.37% stake — comprising a direct 2.48% and an indirect 11.89% held under Skyload and his spouse, Datin Wong Mew Choo, who was not named in the filing.

Additionally, Magma wants to undertake a capital reduction by cancelling RM379.21 million of its issued share capital to offset accumulated losses of the same amount and improve the company’s balance sheet. The company will seek court approval for the proposed capital reduction after obtaining shareholders' approval at an upcoming extraordinary general meeting (EGM).

"The proposed capital reduction will allow us to reset our financial foundation, enabling Magma to pursue future growth with greater strength," Liang said in a statement.

He added that acquiring the Dutamas land will enhance the company’s property development pipeline and contribute to its long-term growth strategy.

"We believe these initiatives will not only strengthen Magma’s financial standing, but also provide the flexibility to capitalise on new opportunities in our core sectors of hospitality and property development," he noted.

Shares in Magma closed unchanged at 20.5 sen on Tuesday, valuing the company at RM194.3 million.