KUALA LUMPUR: To fund the acquisition and the development of the Battersea Power Station, property developer S P Setia Bhd is proposing a placement of up to 322.69 million new shares, or up to 15% of its present issued and paid-up share capital, to investors via a book-building exercise.
The proposed placement is expected to raise at least RM957.4 million, assuming an issue price of RM3.19, which would be used for the acquisition and initial development cost of the
Battersea Power Station project in London as well as working capital for ongoing projects.
In a filing with Bursa Malaysia yesterday, S P Setia also proposed to terminate its existing employees’ share option scheme (ESOS), to be replaced by a new ESOS of up to 15% of its issued and paid-up share capital. The new ESOS scheme is for a five-year period, with an option to be extended by another five years, as opposed to the existing scheme that will end in 2014.
The placement comes just five months after Permodalan Nasional Bhd (PNB) and S P Setia president and group CEO Tan Sri Liew Kee Sin made a joint offer to privatise the property developer at RM3.95 per share. The offer ended in March with acceptance of 79%.
S P Setia said the proposed placement would enable the company to raise the necessary funds to part-finance the company’s share of the acquisition and development of the Battersea Power Station in London. “[It will also] fund the initial development costs of new projects as well as meet the working capital requirements of ongoing projects,” it said.
Together with its partners Sime Darby Bhd and Employees Provident Fund (EPF), S P Setia is acquiring the Battersea property for £400 million (RM1.97 billion). S P Setia’s portion of the acquisition is £160 million. The consortium plans to develop Battersea with a gross development value of £8 billion over the next 15 years.
Apart from the Battersea project, the proceeds from the placement would also be used to fund the development of the 1National Institute of Health Complex, St Kilda project in Melbourne, the Qinzhou Industrial Park in China and the development of a government land in Jalan Bangsar.
S P Setia also said the proposed placement would further strengthen the group’s balance sheet and help accelerate the development cycle of existing projects. “It will also improve the group’s gearing, thereby increasing its debt-financing flexibility to meet future funding requirements,” it said.
At the minimum scenario (assuming no exercise of its current ESOS option and S P Setia warrants), the proposed placement is expected to reduce S P Setia’s gearing to 0.29 times from 0.39 times as at Oct 31, 2011. It would also increase net assets per share to RM2.03 from RM1.88.
At the moment, PNB directly holds 51.63% equity interest in S P Setia and another 18.41% via Amanah Saham Bumiputera. Liew holds a 5.65% stake.
Based on the minimum scenario, Liew’s interest in S P Setia will drop to 4.91% and in the maximum scenario, assuming all the warrants and ESOS options are exercised, his stake will go down to 4.57%.
As for the proposed ESOS, S P Setia said it is intended to motivate and reward its employees. “[It] allows eligible persons to directly participate in the equity of the company and motivate them to contribute to the growth of S P Setia via a greater sense of belonging,” it said.
Under the new ESOS, employees would be able to subscribe for new S P Setia shares at a discount of not more than 10% from the five-day weighted average market price when the ESOS option is offered. The proposals are subject to the approval of Bursa Malaysia and its shareholders at an EGM to be convened soon.
In the last six months, S P Setia’s share price had fallen 11.2%, from a high of RM4.01 on April 13 to RM3.56 yesterday.