This article first appeared in The Edge Malaysia Weekly on October 7, 2024 - October 13, 2024

The transfer of a piece of land between two companies with a common major shareholder has run into a roadblock. The companies in question are Sungei Bagan Rubber Company (Malaya) Bhd (KL:SBAGAN) and Kuchai Development Bhd (KDB) (KL:KUCHAI).

Both are controlled by Kluang Rubber Company (Malaya) Bhd (KL:KLUANG), whose ultimate major shareholder is Nyalas Rubber Estates Ltd. Nyalas Rubber is controlled by Lee Thor Seng, who also has direct interest in Sungei Bagan and KDB.

Last week, Sungei Bagan announced that the state authorities had rejected the transfer of the land from KDB, measuring 8.2 acres and located in Semenyih, Selangor.

The land transfer is part of a larger corporate exercise between Sungei Bagan and KDB valued at RM275.5 million. Under the transaction that was announced in December last year and pending completion, Sungei Bagan was to acquire most of the assets of KDB in exchange for shares issued at RM10.01 each. The assets include KDB’s interest in Singapore-listed Great Eastern Holdings Ltd, which made up almost 70% of the total transaction value.

Fortunately, the land — valued at RM7.8 million — is only a small part of the RM275.5 million transaction. Hence, the rejection of the transfer of the land from KDB to Sungei Bagan did not scuttle the deal. Sungei Bagan is still going ahead with the transaction but at a lower price.

Nevertheless, what is the reason for the rejection of the transfer? After all, the two companies have common major shareholders, hence there is no significant change in the ultimate beneficial ownership. The companies, especially KDB, should disclose the reason why the state authorities rejected the transfer of the Semenyih land.

The land, which will remain with KDB, has agriculture status but with a huge development potential. At some point, it will be monetised. But will the company face problems in unlocking the value of the land given the latest development?

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