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Wednesday, 18 January 2017

(The Edge) ‘Govt-linked fund in preliminary talks to buy SILK highway’

KUALA LUMPUR: SILK Holdings Bhd — still looking for a buyer for its toll concession — is believed to be in preliminary talks with a government-linked fund which has expressed interest in the asset, according to sources. The company announced to Bursa Malaysia yesterday that the trading of its shares will be suspended pending an announcement relating to a material transaction.

This would have been the fourth time that a party has expressed an interest to acquire Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd (SILK), the operator of the Kajang SILK highway, from SILK Holdings.

The 37km Kajang SILK highway links Balakong, Sungai Long, Kajang, Bangi, Serdang and Putrajaya.

The concession contract will end in July 2037.

In May 2014, IJM Corp Bhd proposed to acquire SILK for RM398 million in cash, but the deal was mutually called off following the non-fulfilment of certain conditions precedent within the agreed timeline. The next to express interest, in September 2015, was Taliworks Corp Bhd which owns a 55% stake in Cerah Sama Sdn Bhd, the concessionaire for the Cheras-Kajang highway and New North Klang Straits Bypass Expressway.

In May 2016, Taliworks chief investment officer Kevin Chin Soong Jin said the company was hoping to close the deal within the next few months before deciding to not proceed with the acquisition. Then came WZ Satu Holdings Bhd, in June 2016 when it signed a heads of agreement (HoA) with SILK Holdings for the acquisition of a 100% stake in SILK for RM368 million. WZ Satu also made a U-turn on its intention when it terminated the HoA in September 2016.

Sources said the latest talks between SILK Holdings and the government-linked fund is at a preliminary stage and no concrete decision has been made at this juncture.

The Edge Financial Daily understands that the acquisition failure by the previous three parties is partly due to the terms of the debt paper where the bondholders enjoyed a higher profit-sharing rate following a lower rate in the initial years to ease the company’s burden, as it was financially stressed in the early years.

Just like the previous times where a party expressed interest in its toll concession, SILK Holdings’ share price edged higher by 1.25% to 41 sen yesterday, giving it a market capitalisation of RM284.1 million. Year to date, its share price has surged by 19.12%.