UEM Group Bhd has proposed for a merger between its property arm, UEM Sunrise Bhd, and Eco World Development Group Bhd, which will entail the latter’s delisting from Bursa Malaysia’s main market.

With the corporate exercise, Eco World will become a wholly owned subsidiary of UEM Sunrise.

The move will also see sovereign wealth fund Khazanah Nasional Bhd remain the single largest shareholder of the enlarged UEM Sunrise via UEM Group Bhd. The fund will also be significant shareholders of ECO World on a collective basis.

UEM Group, which is a wholly owned subsidiary of Khazanah Nasional Bhd, has a 66.1% stake in UEM Sunrise.

The proposed merger is to be carried out via the exchange of shares and warrants.

“The holders of shares and warrants in ECO World will exchange their shares and warrants in ECO World respectively for new shares and warrants of UEM Sunrise, thereby becoming the holders of shares and warrants in the enlarged UEM Sunrise,” the terms of the proposal read.

New UEM Sunrise shares will be issued at 44.3 sen per piece in exchange for Eco World shares held at an exchange price of 46.90 sen per share.

This will result in a share exchange ratio of approximately 10,587 new UEM Sunrise shares for every one ECO World share held.

UEM chairman Tengku Azmil Zahruddin said in a letter to the board of directors of both companies that the merger will amalgamate the strengths of UEM Sunrise and Eco World, among the largest developers in the country.

As of September 25, UEM Sunrise had a market capitalisation of RM1.67 billion on Bursa Malaysia. Eco World’s market capitalisation stands at RM1.21 billion.

“Given subdued macro-economic conditions and market headwinds, we believe that there is a pressing need for industry players to consolidate resources and capabilities to strengthen performance and sustainability.

“The merger of UEM Sunrise and ECO World will enhance the merged entity’s scale, diversification and execution capabilities to create a robust business platform for future development,” he said.

Trading of UEM Sunrise and Eco World shares were temporarily halted when the market opened at 9am today, resuming an hour later at 10am.

At 10.50am, UEM Sunrise’s share price gained 12.50% to trade at 40.5 sen while Eco World was up by 7.59% to trade at 42.5 sen.

Azmin also proposed that the chairman of the board of directors of the enlarged UEM Sunrise be an existing board member of UEM Sunrise. 

“We envisage that the composition of the board of directors and key management of the enlarged UEM Sunrise will be determined by an integration committee to be formed, which will comprise representatives from UEM Sunrise and ECO World. The integration committee will be co- chaired by the respective chairmen of UEM Sunrise and Eco World,” Azmil said.

He added the merger process would try to avoid any staff redundancies.

“Although we recognise there may be a need to reorganise and streamline the enlarged UEM Sunrise group’s operations upon completion of the proposed merger, however, taking into account the adverse impact of Covid-19 on the job market, we hope there will not be any immediate redundancy or dismissal of staff of the parties as a direct consequence of the proposed merger.”

A new employees’ share option scheme (ESOS) has also been proposed for employees of the enlarged UEM Sunrise group under the corporate exercise, he added. – October 5, 2020.