The information contained in this summary is derived from and should be read in conjunction with the full text of the announcement on the Proposals found in the attachments to this announcement.
1. INTRODUCTION
On behalf of the Board of Directors (“Board”) of Eco World Development Group Berhad (“EW Berhad”), Maybank Investment Bank Berhad and CIMB Investment Bank Berhad wish to announce that:
(i) Eco World Capital (International) Sdn Bhd (“EW Capital”), a wholly-owned subsidiary of EW Berhad has on 27 October 2016 entered into a conditional share subscription agreement with EWI for the subscription by EW Capital of such number of ordinary shares of RM1.00 each in EWI (“EWI Shares”), representing 27.0% of the enlarged issued and paid-up share capital of EWI upon the Proposed Listing of EWI (as defined below) (“EW Berhad Subscription Shares”) (“EW Berhad Subscription Agreement”); and
(ii) EW Berhad has on 27 October 2016 entered into a collaboration agreement with EWI to establish a framework for mutual collaboration and strategic alliance between them (“Collaboration Agreement”).
The EW Berhad Subscription Agreement and Collaboration Agreement are entered into in conjunction with the proposed initial public offering (“Proposed IPO of EWI”) and listing of EWI on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Proposed Listing of EWI”).
In conjunction with the Proposed IPO of EWI, GuocoLand Limited (“GuocoLand”), through a wholly-owned subsidiary, proposes to enter into a subscription agreement for the subscription of such number of new EWI Shares, representing 27.0% of the enlarged issued and paid-up share capital of EWI on terms and conditions to be mutually agreed (“Proposed GuocoLand Subscription”)
Arising from the Proposed Subscription and Proposed GuocoLand Subscription, EW Berhad, Tan Sri Dato’ Sri Liew Kee Sin (“Tan Sri Liew”) and GuocoLand have on 27 October 2016 entered into an agreement to regulate their relationship with one another as shareholders in EWI and in relation to their voting shares and the exercise of their voting rights in EWI (“Shareholders’ Agreement”).
2. DETAILS OF THE PROPOSALS
The proposals will involve the following:
(i) Proposed Subscription
EW Berhad, through EW Capital, proposes to subscribe for such number of EWI Shares representing 27.0% of the enlarged issued and paid-up share capital of EWI upon the Proposed Listing of EWI at a price to be determined by way of bookbuilding (“Institutional Price”).
(ii) Proposed Collaboration
In connection with the Proposed Subscription, EW Berhad and EWI propose to collaborate and enter into a strategic alliance with the following objectives:
(a) to enhance the “ECOWORLD” brand name in the geographical areas where they have a business presence;
(b) to further develop their respective capabilities and expertise through mutual collaboration, cross sharing of best practices and cross pollination of ideas;
(c) to increase sales of their respective property development projects and grow their market share; and
(d) to mitigate any potential conflict of interest situations which may arise between them. In this respect, EWI agrees not to undertake any property development or investments in Malaysia, while EW Berhad agrees not to undertake any property development or investments in countries other than Malaysia, except through EWI.
The Collaboration Agreement shall take effect on the date on which the EW Berhad Subscription Shares are issued and allotted to EW Capital in accordance with the EW Berhad Subscription Agreement, and shall continue to be in full force and effect unless terminated in accordance the terms of the Collaboration Agreement.
(iii) Proposed Shareholders’ Agreement
EW Berhad, Tan Sri Liew and GuocoLand have entered into the Shareholders’ Agreement which contains (but is not limited to) the following salient terms:
(a) equity interests in EWI held by the parties;
(b) minimum shareholdings in EWI by EW Berhad;
(c) minimum shareholdings in EW Berhad by Tan Sri Liew;
(d) lock-up on Tan Sri Liew’s shareholdings in EWI;
(e) lock-up on GuocoLand’s shareholdings in EWI;
(f) nomination of Directors to the Board of EWI and its subsidiaries or joint ventures;
(g) appointment of Chief Executive Officer and Chief Financial Officer of EWI;
(h) reserve matters;
(i) territorial restrictions in respect of any development or project involving any land, property or site in Malaysia and outside Malaysia; and
(j) priority right to GuocoLand to partner with EWI, in respect of any investment or development in or upon any land, property or site in the People’s Republic of China, Singapore and/or the United Kingdom.
The Proposed Subscription, Proposed Collaboration and Proposed Shareholders’ Agreement are collectively referred to as the “Proposals”. For further details on the Proposals, including the salient terms of the EW Berhad Subscription Agreement, Collaboration Agreement and Shareholders’ Agreement, please refer to Section 2 of the main announcement attached to this announcement.
3. BACKGROUND INFORMATION ON EWI
EWI is a public company in Malaysia principally involved in investment holding. Through its subsidiaries, EWI owns a 75.0% stake in three ongoing property development projects in London, United Kingdom and 100% stake in one ongoing property development project in West Sydney, Australia, with a combined total estimated gross development value (“GDV”) of approximately RM12.94 billion(1) as follows:
(i) Phase 2 of the wider London City Island’s masterplan scheme on the Leamouth Peninsula located approximately 1.5 miles east of Canary Wharf, London, United Kingdom, with an estimated GDV of GBP691.3 million(2);
(ii) Phase 2 of the wider Embassy Gardens’ masterplan scheme in the Nine Elms regeneration area located on the south side of the River Thames, London, United Kingdom, with an estimated GDV of GBP932.5 million(2);
(iii) Wardian London situated next to Canary Wharf, London, United Kingdom, with an estimated GDV of GBP566.1 million(2); and
(iv) West Village on the southern fringe of Parramatta’s central business district and retail precinct in Sydney, Australia (“West Village, Parramatta”), with an estimated GDV of AUD318.4 million(3).
Notes:
(1) Based on the exchange rate of GBP1.00 : RM5.4435 and AUD1.00 : RM3.1987, being the middle rate for the respective GBP to RM and AUD to RM quoted by Bank Negara Malaysia at 5.00 p.m. as at 14 September 2016 and 14 October 2016 (being the last preceding business day of 15 October 2016), respectively.
(2) GDV as at 14 September 2016 based on the respective valuation reports prepared by Jones Lang LaSalle Limited dated 14 September 2016.
(3) This is EWI management’s estimated GDV of West Village, Parramatta as at 15 October 2016, based on a new development consent application which has been submitted to the City of Parramatta Council in June 2016 based on the design from the outcome of a design competition.
For further information on EWI and its property development projects, please refer to Section 3 and Appendix II of the main announcement attached to this announcement.
4. DETAILS OF THE PROPOSALS TO BE UNDERTAKEN BY EWI
4.1 Proposed IPO of EWI
The Proposed IPO of EWI will entail a public issue of up to 2,153,459,200 new EWI Shares to be offered under the Proposed IPO of EWI (“IPO Shares”), representing up to approximately 89.7% of the enlarged issued and paid-up share capital of EWI. The Proposed IPO of EWI consists of offerings and allocations as set out below, subject to the clawback and reallocation provisions to be set out in the prospectus for the Proposed IPO of EWI (“Prospectus of EWI”):
(i) Institutional Offering
The institutional offering will involve the offering of up to 449,459,200 IPO Shares at the Institutional Price, representing up to approximately 18.7% of the enlarged issued and paid-up share capital of EWI, to:
(a) Malaysian institutional and selected investors; and
(b) foreign institutional and selected investors outside the United States of America (“United States”) in reliance on Regulation S under the United States Securities Act, 1933 as amended (“U.S. Securities Act”).
(ii) Retail Offering
The retail offering will involve the offering of 408,000,000 IPO Shares at the Retail Price (as defined below), representing 17.0% of the enlarged issued and paid-up share capital of EWI, to the following persons:
(a) five Directors of EWI and eligible employees of EWI, its subsidiaries and joint ventures (collectively, the “EWI Group”);
(b) 11 Directors of EW Berhad and eligible employees of EW Berhad and its subsidiaries (collectively, the “EW Berhad Group”) who have contributed to the success of the EWI Group;
(c) the entitled shareholders of EW Berhad via a restricted offering. Each entitled shareholder of EW Berhad who applies for at least 100 IPO Shares is guaranteed an allocation of 100 IPO Shares. Any remaining IPO Shares thereafter shall be allocated to the entitled shareholders of EW Berhad who apply in excess of 100 IPO Shares on a pro-rata basis according to their respective shareholdings in EW Berhad; and
(d) Malaysian citizens, companies, co-operatives, societies and institutions incorporated or organised under the laws of Malaysia via balloting.
The initial price to be fully paid upon application under the Retail Offering (“Retail Price”) will be determined prior to the launch of the Prospectus of EWI. The final Retail Price will be determined after the Institutional Price is determined on the price determination date, and will be the lower of the Retail Price or the Institutional Price (“Final Retail Price”). The Final Retail Price will not, in any event, be higher than the Retail Price or lower than the par value of the EWI Shares.
(iii) Allocation of the IPO Shares to EW Capital under the Proposed Subscription.
(iv) Allocation of the IPO Shares to GuocoLand (or its nominated wholly-owned subsidiary) under the Proposed GuocoLand Subscription.
4.2 Proposed Bonus Issue of EWI Warrants
In conjunction with the Proposed IPO of EWI and as an incentive to all the shareholders of EWI subsequent to the Proposed IPO of EWI, EWI will implement a bonus issue of up to 960,000,000 warrants in EWI (“EWI Warrants”) to be issued to its shareholders prior to the Proposed Listing of EWI on the basis of two EWI Warrants for every five EWI Shares held by the shareholders of EWI after the Proposed IPO of EWI and will be completed prior to the Proposed Listing of EWI (“Proposed Bonus Issue of EWI Warrants”).
4.3 Proposed Listing of EWI
Upon successful completion of the Proposed IPO of EWI and Proposed Bonus Issue of EWI Warrants, EWI proposes to seek the admission of the securities of EWI to the Official List of the Main Market of Bursa Securities and to list and quote its entire enlarged issued and paid-up share capital of up to RM2,400,000,000 comprising up to 2,400,000,000 EWI Shares together with up to 960,000,000 EWI Warrants, on the Main Market of Bursa Securities.
For further details on the above proposals to be undertaken by EWI (“EWI Proposals”), please refer to Section 4 of the main announcement attached to this announcement.
5. USE OF PROCEEDS
The gross proceeds to be raised from the Proposed IPO of EWI will accrue entirely to EWI and are expected to be used for:
(i) the repayment of debts of the EWI Group;
(ii) the settlement of the deferred consideration in relation to the acquisition by EWI of Eco World Investment Co Ltd, the wholly-owned subsidiary of EWI which owns a 75.0% stake in the three property development projects in London, United Kingdom;
(iii) working capital of the EWI Group; and
(iv) payment of the estimated fees and expenses to be incurred in relation to the EWI Proposals.
Meanwhile, the gross proceeds to be raised from the exercise of the EWI Warrants will be used for the working capital requirements of the EWI Group.
Further details on the use of proceeds from the Proposed IPO of EWI will be set out in the circular to the shareholders of EW Berhad for the Proposals.
6. RATIONALE AND BENEFITS OF THE PROPOSALS
6.1 Proposed Subscription and Proposed Collaboration
Over the last two years, the EW Berhad Group has grown its property development business across three key economic regions in Malaysia. Having established a strong foundation as a property developer in Malaysia, EW Berhad believes that the Proposed Subscription provides a viable platform for EW Berhad to venture into new markets outside the country and together with the Proposed Collaboration, to position “ECOWORLD” as a global property brand.
EW Berhad will gain immediate access to mature international markets with growth potential and favourable macroeconomic conditions, such as the United Kingdom and Australia, and be able to enhance long-term shareholder value via the development prospects and opportunities presented by the EWI Group. For further details on the prospects of the EWI Group, please refer to Section 7 of the main announcement attached to this announcement.
Since completing the acquisition of the lands in the United Kingdom for development in April/May 2015, the EWI Group has launched all its three property development projects in London, United Kingdom as well as Sydney, Australia between May 2015 and September 2015. As at 30 September 2016, the pre-sold private residential units (including parking) and affordable homes of the development projects in London, United Kingdom are expected to deliver approximately RM4,478.0 million in revenue and as at 15 October 2016, the pre-sold private residential units (including parking) of the development project in Sydney, Australia are expected to deliver approximately RM811.0 million in revenue, to the relevant entities of the EWI Group. As the projects have a total estimated GDV of approximately RM12.94 billion, EW Berhad stands to broaden its earnings base following the completion of the projects in phases commencing from the first half of 2018. Further, the investment in EWI diversifies EW Berhad’s earnings streams geographically so as to be less susceptible to property cycles in Malaysia.
By investing in EWI, EW Berhad would be able to increase its development pace and accelerate its growth through overseas investments in a significant manner and without excessive strain on its financial resources. EW Berhad would also be able to stay focused and channel more resources to fund its business development and expansion activities in Malaysia, while leaving EWI responsible for the management and growth of the overseas business.
The Proposed Collaboration is strategic as it enables EW Berhad to expand the “ECOWORLD” brand name in the property development business beyond Malaysia and into the geographical markets where EWI has a business presence, with a view towards presenting “ECOWORLD” as a global brand. In addition, through the Proposed Collaboration, EW Berhad may be able to capture operational and cost synergies, which would enhance the financial performance of the EW Berhad Group. EW Berhad and EWI will leverage on each other’s capabilities and expertise and assist each other in the sales and marketing of their respective property development projects in order to increase sales and grow market share. By working together with EWI, EW Berhad will also be able to deepen and broaden its technical capabilities and expertise in design and innovation. This will generate better insights and spur creativity for the development of new products to delight property purchasers. All these are expected to add value to the “ECOWORLD” brand and provide EW Berhad with a unique competitive advantage in promoting Malaysian projects to its customers.
6.2 Proposed Shareholders’ Agreement
EW Berhad was initially the sole strategic investor to invest in EWI, subscribing for EWI Shares in conjunction with the Proposed IPO of EWI. Through the Proposed GuocoLand Subscription, EW Berhad and GuocoLand will co-anchor the Proposed IPO of EWI. EWI will benefit from the strategic and financial support of two experienced shareholders who have expertise in identifying, acquiring, developing and funding sizeable mixed-development projects in each of its markets in Asia.
EW Berhad and GuocoLand have both chosen to invest significant stakes in EWI under the Proposed Subscription and Proposed GuocoLand Subscription, respectively. The Shareholders’ Agreement allows EW Berhad and GuocoLand to safeguard their investments in EWI and to regulate the relationship between them as shareholders in EWI, including mitigating any potential conflict of interest situations between them.
Please refer to the full announcement in the attachments for additional details on the Proposals.
This announcement is dated 27 October 2016.
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