Malaysian property developer Iskandar Waterfront Holdings announced on Wednesday that it will merge with its Kuala Lumpur-listed subsidiary Iskandar Waterfront City in a M$1.24 billion ($278 million) deal, putting an end to speculation that the developer will list its assets separately at the group level.
Iskandar Waterfront Holdings looked set to bring one of the most exciting initial public offerings in Malaysia when it sounded out a potential $300 million deal in 2013. The developer drew market attention because it focuses on development in the country’s southern state of Johor, which has huge potential for growth due to its proximity with Singapore.
In particular, most of Iskandar’s land banks are in Johor Bharu, a city at the southernmost tip of the peninsula that is sometimes compared to Shenzhen, the southern Chinese city that has seen a sharp rise in property prices and living standards in recent years.
But Iskandar Waterfront Holdings said on Wednesday that it was dropping the IPO plan, instead seeking a backdoor listing of the bulk of its assets into the already-listed subsidiary. The combination will create one of Malaysia’s largest property developers, with a land bank of 7,400 acres across Kuala Lumpur and Johor Bharu, the group said in a statement.
The group controls a land bank of around 1,000 acres under Iskandar Waterfront City, according to the subsidiary’s latest annual report. That includes a 128-acre waterfront plot jointly-developed with Chinese state-owned property developer Greenland Group.
According to the merger terms, Iskandar Waterfront Holdings will purchase the 61.7% stake it does not already own in Iskandar Waterfront City for M$1.5 per share. That represents a discount of 8.5% to the stock’s latest close, although on a three-month weighted average basis, the offer price represents a premium of 18%.
The merger is being conducted through a scheme of arrangement, which means it will require approval from 75% of shareholders and less than 10% voting against the proposal.
At the same time, Iskandar Waterfront Holdings and certain external parties will inject 3,593 acres of land into the subsidiary for $920 million, representing a discount of 2% to their market value. The external parties include group founder Dato Lim Kang Hoo and Kumpulan Prasarana Rakyat Johor, the investment arm of the Johor state government.
Since the newly-merged entity will be majority-owned by the group, it is likely to conduct a follow-on offering of shares in order to comply with Bursa Malaysia’s 25% free float requirement. The company also plans to raise funds for working capital through issuing shares or bonds, according to the statement.
AmInvestment Bank, CIMB, Maybank and RHB Investment Bank are advising Iskandar Waterfront Holdings, while Iskandar Waterfront Holdings is being advised by Astramina Advisory.
