EcoWorld Development Berhad said today it is no longer pursuing the proposed merger with UEM Sunrise Berhad (UEMS), citing the challenging environment that may result from the enforcement of a second lockdown.
Its chairman Tan Sri Liew Kee Sin said calling off the proposition will enable his group, EcoWorld Malaysia, to pursue other corporate proposals “that may be more complementary to our present growth plans and strategies.”
“After careful evaluation alongside EcoWorld Malaysia’s own business plans and the current challenging environment with the re-implementation of movement control order, we have decided not to pursue the Proposed Merger further with UEMS,” he said in a statement issued this afternoon.
The proposed merger came under growing public scrutiny after critics claimed the deal was another attempt to bail out a beleaguered company.
Critics had raised the alarm about the company’s high gearing ratio, reportedly at 64 per cent as of last year.
Gearing ratio is often the preferred indicator of a company’s borrowing leverage by measuring its total debt against total equities.
Liew was also the central figure in a controversy involving SP Setia, the township developer he founded and later sold to Permodalan Nasional Berhad in a deal that reportedly caused the fund RM3 billion in impairment.
The UEMS-Eco World merger has made news since 2019 but was speculation until October last year, when UEM Group Bhd announced an official proposal to take over Eco World Development via a merger with its subsidiary UEMS.
Several analysts said the proposed merger had immense potential value for both companies in terms of cost synergies, execution capabilities and financial flexibility.
UEM Group had proposed a share swap deal for the takeover. Citigroup Global Markets Inc had valued the deal at around RM2.6 billion, New Straits Times reported.
UEM Groups is fully owned by sovereign wealth fund Khazanah Berhad.
Eco World group said it will now focus on its own business plans for the 2021 financial year, which includes a sales target of RM2.875 billion for EcoWorld Malaysia or 25 per cent higher than the RM2.3 billion sales recorded last year.
“On this note, we have got off to a very strong start with RM500 million sales already achieved in the first two months of FY2021,” Liew said.
“This is a very encouraging result given November and December are typically quiet months for the property sector.”
The former SP Setia founder said the sales underpinned the Eco World group’s solid performance in the face of a volatile market.