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KUALA LUMPUR: Ho Hup Construction Co Bhd may have to resort to bringing Malton Bhd to court if it is not able to renegotiate a fairer deal in their joint development agreement (JDA) involving a 60-acre plot of land in Bukit Jalil.
A source who was present at the renegotiations on Tuesday said Ho Hup may have “no choice but to see Malton in court if the company is unable to get Malton to renegotiate a fairer deal”.
If an impasse occurs, a court settlement would seem the only way to resolve it because Ho Hup’s shareholders can’t block the JDA in an EGM, as the agreement does not involve the disposal of assets.
“Any court proceedings will be messy, but Ho Hup must go through it if it doesn’t have a choice. It is important that the company is able to take charge of its own destiny,” the source said.
The JDA was entered into and announced by Ho Hup’s previous board led by Datuk Vincent Lye just a few hours before a March 17 EGM that had Lye and the previous board ousted from the company.
Now, the new board of Ho Hup, led by ex-Kuala Lumpur mayor Tan Sri Kamaruzzaman Shariff, is trying to renegotiate the JDA. This is an important task for the new board because the 60 acres in question is Ho Hup’s last piece of land and is the PN17 outfit’s only hope for revival.
According to an announcement to Bursa Malaysia on March 17, Bukit Jalil Development Sdn Bhd (BJD), a 70%-owned subsidiary of Ho Hup, was to develop the land jointly with Pioneer Haven Sdn Bhd (PHSB), a wholly owned subsidiary of Malton.
It was agreed that PHSB would be solely responsible for the financing of the development, and that BJD would not fork out any money but would be entitled to at least RM265 million, or 17% share of the project’s gross development value, from Malton, over the various phases of the project.
“The minimum entitlement of RM265 million reflects just the market value of the 60-acre land (at RM101.40 per sq ft). If Ho Hup were to sell the land outright, it could get the entire amount or even more in a one-time payment. But in the JDA, it would only get the amount in stages over the development period of say, 10 years? And where is the profit element from this deal? So how can this be fair to Ho Hup?” says a source.
The source said Ho Hup’s hopes now rested on Malton’s goodwill. “The company hopes that Malton will do the right thing and renegotiate a deal that is fair to both parties. Give Ho Hup control of its assets so that it can chart its own destiny. Ho Hup is the poor cousin, you know, a PN17 company and Malton is the rich cousin.”
The source wished to remain anonymous because of the sensitivity of the matter, explaining that both parties were “all very good friends” and that the issue became “complicated because both sides are from different companies now” who must keep the interest of their shareholders protected.
“It is just like you have been newly married and you found out that you had married the wrong person. So divorce papers should be signed as soon as possible so that both sides can be comfortable once again.”
Tuesday’s meeting between Ho Hup and Malton lasted for about 1½ hours, with no solid conclusion, said the source. He pointed out that Ho Hup would now have to “analyse the financial implications of the deal and look at the overall loss in potential profit from this project”.
“Ho Hup’s board is still at a fact-finding stage and it will try to wrap it up quickly and come to a conclusion soon.”
Meanwhile, in a statement on Tuesday, the PN17 company said it had applied to Bursa Malaysia for another four months until Aug 4, to submit its regularisation plan.
This article appeared in The Edge Financial Daily, April 1, 2010.
