EcoWorld-UEM Sunrise merger off the table

Critics say it’s the wrong time to create another property giant amid tighter financing conditions by banks and poor buyer sentiments


THE proposed merger of UEM Sunrise Bhd and Eco World Development Group Bhd (EcoWorld), which would have created Malaysia’s largest property group, has been called off.

EcoWorld chairman Tan Sri Liew Kee Sin said the challenging environment presented by the latest round of coronavirus restrictions played a part in the company’s decision to walk away from the negotiations.

He said EcoWorld will now concentrate on its business plan after walking away from the proposed merger with the Khazanah Nasional Bhd’s property group.

“With the current challenging environment and the reimplementation of the Movement Control Order, we have decided not to pursue the proposed merger further with UEM Sunrise,” said Liew in a Bursa Malaysia filing yesterday.

The merger was supposed to take advantage of UEM Sunrise’s large landbank and EcoWorld’s global branding.

It became a lightning rod for criticism when the merger was announced in September, with critics saying it looked too much like a bailout for EcoWorld.

The main concern was that Khazanah’s stake in the enlarged UEM Sunrise, held via the UEM Group, would have been diluted without any visible gain to the sovereign wealth fund.

Although the deal would have created the country’s second-largest landbank owner after Sime Darby Property Bhd, critics said it was the wrong time to create another property giant amid tighter financing conditions by banks to buy property and poor buyer sentiments made worse by the Covid-19 pandemic.

Proponents of the failed merger pointed out the combined entity would have had unbilled sales of RM6.12 billion, while critics said this would have come with a combined net debt of RM6.37 billion.

Liew added that with the merger now off the table, EcoWorld will be able to actively pursue other corporate proposals that may be more complementary to its present growth plans and strategies.

“It will also enable us to focus on the group’s own business plans for the financial year 2021 (FY21) which includes a sales target of RM2.88 billion for EcoWorld that is 25% higher than the actual RM2.3 billion sales recorded in FY20,” he said.

Liew said EcoWorld got off to a very strong start with RM500 million sales already achieved in the first two months of FY21.

“This is a very encouraging result given November and December are typically quiet months for the property sector.

“EcoWorld’s ability to lock in these sales demonstrates how effective they have transformed the overall sales process using every tool available, particularly digital and social media channels, to engage customers and close sales,” he said.

EcoWorld shares closed 1.11% higher at 46 sen yesterday, while UEM closed 1.16% higher at 44 sen.

MIDF Research head Imran Yassin Md Yusof said the collapsed deal is unlikely to affect the general merger and acquisition sentiment as the proposed merger was still in the initial stage.

“There were no concrete plans on the structure of the merger or synergies to be derived were revealed.

“Hence, the companies are expected to focus on their own business plans going forward,” he told The Malaysian Reserve.

The collapsed deal joined the basket of failed proposed mergers in recent times such as the one between national carrier Malaysia Airlines Bhd and lowcost carrier AirAsia Group Bhd, as well as Al Rajhi Banking and Investment Corp (M) Bhd’s failed merger with Malaysian Industrial Development Finance Bhd.

Read our earlier report


EcoWorld-UEM Sunrise merger off on MCO 2.0