This article first appeared in The Edge Financial Daily, on December 11, 2015.

KUALA LUMPUR: DRB-Hicom Bhd has offered to sell to Pos Malaysia Bhd, in which it owns 32.21%, its KL Airport Services Sdn Bhd (KLAS) business and part of a freehold industrial land in Shah Alam, Selangor for RM835.16 million to consolidate its logistics business under Pos Malaysia.

The total disposal consideration of RM835.16 million with respect to the proposed disposals shall be satisfied via the issuance of 250.80 million new ordinary shares of 50 sen each in Pos Malaysia to HICOM Holdings Bhd at an issue price of RM3.33 per share, according to DRB-Hicom’s Bursa Malaysia filing.

The shares’ issue price will be adjusted if the market price of Pos Malaysia shares closer to the signing of the sale and purchase agreements in relation to the disposals exceeds a 10% variance from the stipulated issue price.

The disposals are expected to raise the shareholdings of DRB-Hicom and persons acting in concert with it, including HICOM Holdings, to over 33%, as they intend to seek an exemption from the Securities Commission Malaysia (SC) from the obligation to undertake a mandatory takeover for the remaining Pos Malaysia shares not already owned by them after that.

DRB-Hicom said the disposal offers are conditional upon each other and shall only be implemented after two parcels of agriculture land measuring 100 acres (40.46ha) in Bandar Kota Perdana, Kubang Pasu, Kedah — currently held by Konsortium Logistik Bhd, a unit of KLAS — are transferred to Hicom Vertex Sdn Bhd, an indirect wholly-owned unit of DRB-Hicom.

It is also dependent on the capitalisation of an existing loan facility obtained by KLAS of up to RM370 million, and a non-current inter-company amount owing by KLAS to DRB-Hicom of about RM182.9 million via the issuance of new KLAS shares at par value to Hicom Holdings.

KLAS is offered for sale at RM766.16 million, though the final price will be subject to adjustments, if any, based on the difference between the outstanding amount of the KLAS loan facility (RM286.8 million as at Aug 31) and the outstanding amount prior to the completion date of the proposed disposals.

Also for sale is the freehold industrial tract of 9.91acres in Section 28, Shah Alam. Its price tag is RM69 million. The land has been approved for the development of 30 units of semi-detached factories and two units of detached factories.

DRB-Hicom said the disposals will allow the group to streamline and improve its operational efficiency, and enhance the synergies between the various business segments within its postal and logistics businesses (currently under Pos Malaysia and the KLAS Group, respectively) by consolidating the logistics business under Pos Malaysia.

“The proposed disposals are also expected to improve the medium- to long-term earnings potential of Pos Malaysia and its subsidiaries,” it added.

The proposed disposals will not change the existing postal businesses of Pos Malaysia, but will complement and strengthen the ecosystem of the logistic businesses of Pos Malaysia and the DRB-Hicom group of companies, it noted.

DRB-Hicom closed unchanged at RM1.21 for a market capitalisation of RM2.34 billion, while Pos Malaysia dipped 8 sen or 2.64% to close at RM2.95 for a market capitalisation of RM1.58 billion.