Parkson Holdings’ proposed sale to Hong Kong-listed unit thwarted

KUALA LUMPUR (Oct 13): Parkson Holdings Bhd’s proposed internal reorganisation exercise, which would have seen some RM641.4 million cash channelled from Hong Kong-listed subsidiary, Parkson Retail Group Ltd (PRG), to its coffers has been rejected by the latter’s minority shareholders.

Parkson Holdings announced to Bursa Malaysia that the resolution on the proposed purchase of a 67.6% stake in its Singapore-listed sister company — Parkson Retail Asia Ltd (Parkson Asia) — for S$228.51 million (RM676 million) cash from its parent Parkson Holdings was not passed at yesterday’s extraordinary general meeting.

Consequently, Parkson Holdings will not proceed with the proposed capital distribution, which hinged on the amount received from the divestment of its Parkson Asia shares to PRG, said the retail group in the announcement.

The proposed reorganisation plan was to have PRG own Parkson Asia, which has 67 stores in Malaysia, Vietnam, Indonesia and Myanmar. Currently, Parkson Holdings holds a 53.1% stake in PRG and a 67.6% in Parkson Asia. 

With the proposed reorganisation plan falling through, Parkson Holdings, which has mapped out massive expansion plans including venturing into the shopping mall business, will not have that RM641.4 million cash to expand its war chest.

A total of 63.4% of PRG shares, or 568.34 million, held by entitled shareholders to vote for the resolution, voted against the company buying PRA through its wholly-owned subsidiary Oreloen (Hong Kong) Ltd, according to the announcement to Bursa.

East Crest International Ltd, a wholly-owned subsidiary of Parkson Holdings which holds the 67.6% stake in PRA and 53.1% or 1.45 billion shares in PRG, had to abstain from voting on the resolution. PRG’s independent shareholders who voted for the purchase collectively held 327.51 million shares in the Hong Kong-listed company.

Despite his plan being thwarted, Cheng, speaking as PRG’s executive director and chairman, expressed his gratitude to PRG’s shareholders “for their engagement and continuous support”.

“Although the acquisition will not proceed, the board remains committed to drive the group’s long-term growth to create value for shareholders. With the group’s strong track record, nationwide store network, and good relationships with suppliers, partners and brands, the group will continue to pursue all of its existing strategies to transform into a leading lifestyle concept retailer,” he said.

Parkson Asia’s sale was first posited in mid-July as Parkson Holdings said it would be able to raise funds for business expansion, new investment opportunities, and/or working capital. Initially, almost all of the RM641.42 million proposed raised proceeds would have gone to these initiatives, but the quantum was reduced to RM531.16 million when it announced a capital distribution on Aug 17.

Yesterday, Parkson Holdings’ share price fell four sen or 3.54% to RM1.09 to bring its market capitalisation to RM1.19 billion.

This article first appeared in The Edge Financial Daily, on Oct 13, 2015.