KUALA LUMPUR: MMC Corp Bhd, controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary, is buying a 70% stake in KMB Seaport Sdn Bhd – operator of Tanjung Bruas Port in Melaka – from its largest shareholder Seaport Terminal (Johore) Sdn Bhd for RM21 million cash. MMC said this is part of its effort to maintain its position as a key player in the country’s port industry. In a filing with Bursa Malaysia today, MMC said it has entered into a share sale and purchase agreement (SPA) with Seaport Management Services Sdn Bhd to acquire 7,000 shares or a 70% stake, as well as 4.99 million irredeemable convertible cumulative preference shares in KMB Seaport, which is a joint venture between Seaport Management and Kumpulan Melaka Bhd — the investment arm of the Melaka state government.
Under the SPA, MMC has the right to nominate any of its subsidiaries to hold the KMB shares. MMC said the transaction will be fully funded with internal funds. Seaport Management is a wholly-owned subsidiary of Seaport Terminal (Johore), which in turn owns 51.76% of MMC shares. Thus, the transaction is deemed as a related party transaction. The purchase price of RM21 million is 24%-38% lower than the fair market value of KMB Seaport of between RM27.6 million to RM33.8 million as appraised by Grant Thornton Consulting Sdn Bhd. The transaction is still subject to approval from the Public Private Partnership Unit of the Prime Minister’s Department. Barring any unforeseen circumstances, it is expected to be completed in the first half of 2017.
MMC noted that the proposed acquisition is in line with its initiative to make further strategic investment in MMC’s core ports and logistics business in order to strengthen the group’s financial position. The proposed acquisition would contribute positively to the future earnings of the group, it added. In March last year, KMB Seaport was awarded a 30-year concession to operate Tanjung Bruas Port. A small terminal developed in the late 1970s, Tanjung Bruas Port has two jetties that can accommodate small to medium-sized vessels. According to MMC, Tanjung Bruas Port is mostly dependent on equipment on vessels to load and unload cargo. Because of its small size as well as limited equipment available, the operational efficiency at the port is low. “KMB Seaport has laid out a development plan to be implemented at Tanjung Bruas Port. The development plan is intended to expand the capacity of the port, as well as modernise its equipment and facilities,” said MMC.
It said among the development plans to be undertaken at the Tanjung Bruas Port in the near term include purchase of cargo handling equipment and refurbishment of existing storage facilities and warehouses. There are also plans to construct a new berth by extending the existing jetty, as well as a new bridge. “The proposed acquisition is expected to result in higher contribution from KMB Seaport to the future earnings of the MMC Group as the financial results of KMB Seaport will be consolidated into MMC Group’s financial results,” added MMC. However, MMC warned that there is no assurance that the anticipated benefits of the proposed acquisition will be realised or that MMC Group will be able to generate sufficient profits arising from the transaction to offset the associated acquisition costs incurred. “There is also no assurance that the expected financial performance of KMB Seaport could be achieved after the completion of the proposed acquisition,” it said. MMC’s current stable of ports are Port of Tanjung Pelepas (PTP), Johor Port, NCB Holdings Bhd that operates Northport in Port Klang and a 49% stake in Penang Port Sdn Bhd. The long-speculated listing of the various ports under MMC is expected to take place this year. MMC shares closed up two sen or 0.88% at RM2.30 today, for a market capitalisation of RM7 billion.