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Tuesday, 28 February 2017

(The Star) Sime’s demerger will not involve issuance of new shares

KUALA LUMPUR: Shareholders of Sime Darby Bhd will get shares in all three companies following the demerger exercise.

Unveiling details of its proposed demerger, the company said the exercise would not involve the issuance of new shares, but instead a distribution of shares through a dividend-in-specie scheme.

Sime president and chief executive officer Tan Sri Mohd Bakke Salleh said he was confident that the creation of three pure play firms would achieve the group’s target to maximise value for shareholders.

“Shareholders will have the option of investing in either or all of the pure play counters, going forward. Each entity will be able to operate according to its own industry dynamics, as well as tapping into the capital markets for growth,” he told a media briefing here yesterday.

It is notable that the exercise will not involve any public offering of new shares.

This means that there will be no cash proceeds raised, and there will be no dilution to existing stakes held by Sime’s shareholders.

The exercise will see Sime’s existing major shareholders, namely, AmanahRaya Trustees Bhd (40.6%), Permodalan Nasional Bhd (5.6%) and the Employees Provident Fund (10.2%), retain the same shareholding in both Sime Darby Plantations and Sime Darby Property, as well as in Sime Darby Bhd.

“Other companies may pursue the initial public offering (IPO) route, but in the case of Sime Darby, we decided that the share redistribution would be in the best interest of shareholders. They can unlock value via the sale of shares in the listed entities if they choose to,” he explained.

Late last year, Sime stated that the conglomerate would be carved up into three parts – Sime Darby Plantations Sdn Bhd, Sime Darby Property Bhd and Sime Darby Bhd, which would retain the group’s industrial, motor and logistics businesses. It was a move to create more value for the shareholders.

An integral part of the exercise was that the group would undertake an internal exercise involving the restructuring of borrowings, the transfer of assets and the capitalisation of inter-company loans.

The corporate exercise would also involve the redistribution of shares in the newly-listed entities for Sime’s existing shareholders.

According to Mohd Bakke, the exercises may be completed by the end of this year.

Spin-offs involving no new fundraising or IPOs are few and far between in corporate Malaysia.

The last major demerger exercise comparable to what Sime is doing was the restructuring of the Telekom Malaysia (TM) Group into two entities – TM Bhd and TM International Bhd (now Axiata Group Bhd) back in 2007.

Going forward, Mohd Bakke added that the group was not ruling out a listing for Sime Darby Motors, which had previously been postponed due to unfavourable market conditions.

“There may well come a day when the board decides to create another pure play company in Sime Darby Motors. But for now, it will be housed within the group alongside the logistics and industrial businesses,” he said.

Sime’s earnings surged 126% to RM644mil in the second quarter ended Dec 31, 2016 from a year ago, boosted by the improvement in earnings for the plantation division.

In a filing with Bursa Malaysia yesterday, the plantation-property heavyweight said its earnings jumped from RM285mil.

Revenue rose 4.3% to RM12.34bil from RM11.83bil. It has declared an interim dividend of six sen a share.

In the first half, its earnings rose 78.5% to RM1.08bil from RM609mil in the previous corresponding period. Its revenue rose nearly 2% to RM22.44bil from RM22bil.

The group has also declared an interim dividend of six sen per ordinary share for the quarter.