The making of a RM6.5bil giant

IWH proposes to take over the listing of IWC and consolidate all properties under one company

KUALA LUMPUR: After three years of mulling a listing of its own, Iskandar Waterfront Holdings Sdn Bhd (IWH) is finally coming to the capital market through a corporate exercise that would see it being one of the region’s biggest owners of land in cities.

In a corporate proposal announced yesterday, IWH will take over the listing status of Iskandar Waterfront City Bhd (IWC) through a share swap between the two.

The ratio is on the basis of one IWC share to be exchanged for one share in an enlarged IWH. The new-look IWH (Newco) will also own up to 7,400 acres of land fronting the sea between Johor Baru and Singapore.

IWH at the moment is 63%-owned by Tan Sri Lim Kang Hoo (pic) through his private company Credence Resources Sdn Bhd, while the remaining shares are held by Kumpulan Prasarana Rakyat Johor (KPRJ). IWH holds a 38.34% stake in IWC that has 1,072 acres mainly located in Tebrau, Johor.

IWH, on the other hand, has 3,900 acres of waterfront land, of which 80% has been claimed.

The corporate exercise proposes that all land outside IWH that is owned by Lim and KPRJ be consolidated in exchange for new shares in the NewCo and redeemable convertible preference shares (RCPS).

The amount of land to be injected into the NewCo is 3,593 acres. Of the amount, Lim’s portion is 452 acres valued at RM2.6bil.

As for KPRJ, its total land that can be injected into the Newco is 3,141 acres valued at RM1.5bil.

According to a statement issued by the group, three independent valuers undertook the valuation of the land.

Apart from Lim and KPRJ, IWH will also make an offer to the Sultan of Johor to inject his land in Johor Baru into IWH.

The Ministry of Finance Inc will also be given an offer to consolidate its 28% stake in Iskandar Waterfront Sdn Bhd, the company that holds the waterfront land under IWH, at the Newco level.

If all the parties agree to the consolidation of their assets and shares at the IWH level, then the new-look IWH will have up to 7,400 acres of land.

“The new-look IWH will be the largest owner of land in Johor Baru city. This exercise does not include IWH’s 30% stake in Bandar Malaysia, which is developing another 483 acres of prime land in Kuala Lumpur city,” said Lim.

The new-look IWH, if all approvals are given and the proposal is agreed upon by the relevant stakeholders, will be sitting conservatively on RM30bil of prime city land. The basis of RM30bil is on the assumption that the 7,400 acres of land in the Johor Baru waterfront is valued at RM93 psf.

Lim said that IWH was not a property developer or master developer.

“It is the owner of land located in cities. The first phase is the city of Johor Baru and later on it will include Bandar Malaysia,” he said.

He said that the income from IWH would be generated from land sales, joint ventures with property developers and rental income from fixed assets.

“IWH is backed by pure land that is located in the city. It will only grow in value over time.

“We will take up minority stakes in joint ventures that would give us recurring income. We will also have properties in prime areas that will give us rental income,” he said, adding that IWH has been profitable.

“We make money from land sales and joint-venture developments. All the money has been ploughed back to reclaim the land and to build the infrastructure,” he said.

Upon the conclusion of the merger and restructuring, the expanded share capital of IWH is expected to be up to 4.3 billion shares, and if based on the offer price of IWC at RM1.50, the market capitalisation of the NewCo would be RM6.45bil.

The reference price for the exercise is set at IWC’s share price of RM1.50. The offer price for the share swap is a 14% premium over the 30-day volume-weighted average price of IWC shares.

IWC was last traded at RM1.64 just before its suspension last Friday, which is an 8.5% premium to the offer price.

It should be noted that the land injected into IWC will not include IWH’s 30% stake in Bandar Malaysia

“We have decided not to include Bandar Malaysia at the moment because it will be just too big.

“It will be in subsequent phases, provided the relevant approvals are there,” said Lim.

On the RCPS, it only can be converted if the new-look IWH generates a profit of RM1bil on a cumulative basis.

The conversion ratio is two RCPS to be converted into one IWH share.

“That means IWH has to hit RM1bil profit before the conversion can take place. The reason for the issuance of the RCPS is to prevent dilution,” said Lim.

Following the merger and restructuring, IWH is proposing to place out 600 million shares, of which 400 million would comprise new shares and 200 million existing shares.

The placement tantamounts to about 13% of the enlarged capital of IWH and will help fulfil the free float requirement of IWH.

The minority shareholders, who form 56% of IWC, would be able to tap into the enlarged new entity with a bigger landbank based on a one-to-one share swap basis.

“We are confident of capital appreciation of the land, considering that over a life-span of 25 to 30 years, the land located at strategic locations can only increase in value,” Lim said.

Astramina Advisory Sdn Bhd is the financial adviser for IWH and transaction adviser for IWC. AmInvestment Bank Bhd, CIMB Investment Bank Bhd and Maybank Investment Bank Bhd have been appointed joint principle advisers for IWC.