Calls for more scrutiny over UEM Sunrise-EcoWorld merger

The proposed merger should consider the ‘national interest at heart’ instead of benefitting only the companies’ owners and shareholders

by AZREEN HANI / pic by MUHD AMIN NAHARUL

THE proposed corporate merger between UEM Sunrise Bhd and Eco World Development Group Bhd needs rigorous scrutiny to ensure public’s welfare is protected, or it will set a bad precedent for other mergers with government-linked companies (GLCs) in the future, experts said.

Economist Tan Sri Dr Ramon Navaratnam (picture) said the proposed merger should consider the “national interest at heart” instead of benefitting only the companies’ owners and shareholders.

“The government should step in and scrutinise this deal in detail. Who is going to benefit the most from it? Is the exercise to benefit only the select few or the people in general?” he told The Malaysian Reserve (TMR) when contacted yesterday.

“If these factors are not taken into consideration, it will set a bad precedent and open up to a lot of possible lopsided arrangements in the future,” he added.

Any unfair elements from the deal will only result in the public losing faith and confidence in GLCs and firms involved, the Asian Strategy & Leadership Institute chairman warned.

Another expert who spoke under the condition of anonymity questioned whether UEM Sunrise, a wholly owned entity of Khazanah Nasional Bhd, will have a majority shareholding control should the merger materialise.

“We also need to look whether Khazanah will get any monetary benefit from the merger. From the looks of it, it seems that the company will have to absorb EcoWorld’s debts,” the analyst said.

“This merger, if it happens, will be seen as just another bailout. But at whose expense?”

Last week, Malaysian Rating Corp Bhd said a proposed merger between UEM Sunrise and EcoWorld could impact the credit profile of the enlarged UEM Sunrise group.

“Based on the merger proposal, our preliminary calculations indicate that its leverage position as reflected by the debt-to-equity ratio could elevate to about 0.90 time from a moderate 0.56 time as at end-June 2020,” it said in a statement last Thursday.

A property valuer also told TMR recently that the merger should be conducted in a transparent manner, with the price arrived at on a willing buyer-willing seller basis.

Additionally, leaders at both sides of the political divide have questioned the need for a merger to take place as it involves taxpayers’ money and Bumiputera landbanks.

Lembah Pantai MP Fahmi Fadzil said yesterday that the government, through Khazanah, should not rush in making a decision and reconsider the viability of the merger.

He pointed out that EcoWorld’s shares have dropped to 0.39 sen from RM1.40 five years ago, raising concerns on the firm’s portfolio as well.

Federal Territories Umno Youth chief Mohamed Nizham Abdullah Hamdi urged the government to justify the possible merger, stressing that UEM Sunrise has huge landbanks and most of these landbanks are concentrated in Bumiputera areas.

“Will these interests still be protected?” he asked in a recent statement.

The merger talk has also become one of the controversial propositions under the ruling of Perikatan Nasional (PN) as UEM Sunrise is 66.1%-owned by Khazanah, via UEM Group Bhd.

Former Deputy Housing Minister Datuk Raja Kamarul Bahrin Shah Raja Ahmad urged the PN government and Khazanah to study the need to continue with the proposal, saying that it is seen as detrimental to both entities.

UEM Sunrise’s shares ended 2.63% or one sen higher at 0.39 sen, giving the company a market capitalisation of RM1.77 billion last Friday.