IGB to sell Renaissance KL for RM765 mil

KUALA LUMPUR (Aug 15): IGB Corp Bhd announced a proposed disposal of Renaissance Kuala Lumpur Hotel (Renaissance KL) (pictured) by Great Union Properties Sdn Bhd, a wholly-owned subsidiary of IGB to Ventura International Sdn Bhd for RM765 million.

The disposal is as a going concern free from encumbrance and liabilities, with all assets and items used in connection with the operations of the hotel business that are owned by Great Union and are located at Renaissance KL as at the completion of the sale and purchase agreement (SPA), including all buildings, structures, plant, machinery and equipment, and fitting, furnishings and fixtures thereon together with the business of the hotel and all activities related thereto, according to IGB's filing with Bursa Malaysia.

"The divestment represents an attractive opportunity for the Group to unlock business assets at a favourable price. IGB intends to utilise the proceeds for working capital and to support its continued growth for suitable acquisitions or investments when such opportunity or opportunities arise," read the filing today.

IGB said Renaissance KL currently contributed approximately 8% to the Group's revenue for the financial year ended Dec 31, 2015 (FY15).

It also said Great Union's contribution to the Group's revenue for the past three financial years — FY13 to FY15 — were RM108.5 million, RM103.9 million and RM93.7 million respectively. Great Union also contributed to pre-tax profit RM4.6 million and RM600,000 in FY13 and FY14 respectively but recorded a pre-tax loss of RM7.9 million in FY15.

"Despite the loss of income from Renaissance KL, the proceeds from proposed disposal will be channelled towards higher yielding investments that would provide favourable returns and growth prospects," it said.

The Group is expected to make a gain of approximately RM85 million net of tax in FY17, which will improve the net assets per share and earnings per share by 6 sen, according to the filing.

The proposed disposal is expected to be completed within four months from the date of fulfilment of the conditions precedent as specified in the SPA.

The board of directors of IGB is of the view that the proposed disposal represents an opportunity for the Group to unlock values on its low-yielding investment, and the proceeds will be redeployed for more yield and value accretive investments.

Earlier today, Bursa Malaysia approved IGB's request for suspension of its securities from 9.00am to 5pm today, pending the announcement of a material transaction. IGB was last traded at RM2.56 last Friday (Aug 12), with RM3.42 billion in market capitalisation. — theedgemarkets.com

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