KUALA LUMPUR (April 15): Dutaland Bhd (KL:DUTALAND) has entered into a conditional termination agreement with Olympia Industries Bhd (KL:OLYMPIA) to scrap earlier consortium and development agreements that were set out to develop prime tracts of land in the Sri Hartamas vicinity.
The consortium agreement was entered into by Dutaland’s wholly-owned subsidiary KH Estates Sdn Bhd (KHE) and Olympia Industries’ wholly-owned unit Olympia Properties Sdn Bhd (OPSB) in 2003.
KHE and OPSB then appointed Dutaland’s wholly-owned subsidiary KH Land Sdn Bhd as developer to develop the land under a development agreement in 2007.
The decision to unwind the partnership follows a “review of strategic and operational challenges” which underscore the need to pursue a revised strategy, according to separate company circulars.
Both parties have agreed to retain their respective ownership of the undeveloped lands worth some RM1.92 billion based on independent valuation, comprising RM801.85 million for OPSB (41.8%) and RM1.12 billion for KHE (58.2%).
Of the eight main parcels of land, which are being held in a trust for the parties, one parcel has been developed into a housing development, while two parcels were sold in 2011 and 2016 respectively. The current potions of the land that remain undeveloped amount to 1.94 million sq feet.
They have also agreed that the distribution of asset, liabilities, income and expenses accruing from the joint development under the consortium agreement will be made in accordance with the agreed ratio that was earlier set out in the agreement, being 58:42 in favour of KHE.
Dutaland, in its filing, said that the consortium agreement which was entered into two decades ago no longer allows KHE to execute its objectives for its share of undeveloped land effectively, citing “differences in business direction” with Olympia Industries as among the challenges.
Olympia Industries, meanwhile, cited “financial challenges which necessitate a different approach” for the lands.
The proposed termination is intended to allow both companies greater flexibility to plan and develop its landbank without seeking approval from the former partners, they said. It will also allow both OPSB and KHE to pursue their respective business directions independently, without needing mutual consultation, they added.
Dutaland said the restructuring is expected to result in a one-off accounting gain of about RM290.3 million, arising from the termination of the joint operation, while Olympia Industries would see a similar gain amounting to RM271.5 million.
As the proposed termination is deemed a related-party transaction, it will be subject to the approval of non-interested shareholders at an extraordinary general meeting.
Dutaland and Olympia Industries share a common major shareholder, Tan Seri Datuk Yap Yong Seong, who is group managing director in both companies.
Yap holds 57% equity interest in Olympia Industries via Duta Equities Sdn Bhd and a 65.1% stake in Dutaland via Kenny Height Developments Sdn Bhd.
Dutaland closed unchanged at 30 sen on Tuesday, giving it a market value of RM258.3 million.
Olympia Industries similarly closed unchanged at 55 sen, valuing the company at RM56.3 million.