CEO Morning Brief

Star Media Minority Shareholders Reject Related Party Deal With Matang

Publish date: Thu, 01 Jun 2023, 08:39 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (May 31): Star Media Group Bhd shareholders have voted to reject its proposal to sell properties, consisting of two units of factory and warehouse in Shah Alam, to Matang Bhd for RM33 million in a share and cash deal.

In Star Media’s virtual extraordinary general meeting (EGM) on Wednesday morning (May 31), 46% of shareholders who were present in the meeting holding 81.7% of voting shares rejected the resolution, while 53% of present shareholders holding 18.3% voted in support. The Malaysian Chinese Association (MCA), which holds 43.23% of Star Media, did not vote, being an interested party due to shareholdings in both companies.

In total, 93 shareholders holding 49.71 million shares rejected the motion in the EGM, while 109 shareholders holding 11.11 million shares supported the proposal.

The deal would have seen Matang satisfying RM28.9 million of the purchase consideration via issuance of 357 million new Matang shares at 8.09 sen apiece to Star Media.

This will see Star Media having a cross-holding of 13% in Matang. For the remaining purchase consideration, Star Media will receive a cash payment of RM4.12 million from the plantation group.

The deal is deemed a related party transaction as MCA owns 43.23% of Star Media, and a 17.15% stake in Matang.

At the noon market break, Matang shares traded unchanged at 8.05 sen, while Star Media shares had fallen half a sen or 1.19% to 41.5 sen.

Aside from a land asset, the deal includes the sale of the two semi-detached buildings to Matang, which will be developed by Star Media at an estimated cost of RM14.8 million.

Star Media previously said the land and building disposals will see it booking a net pro forma gain of RM15.6 million, or approximately two sen per share in profit.

The land, where construction works began just this month, is located within the Star Business Hub, an industrial development project in Bukit Jelutong, Shah Alam.

During the virtual EGM earlier, Star Media independent non-executive chairman Tan Sri Chor Chee Heung reiterated that the proposal to build the properties before selling it to Matang provides “an accessible platform for diversification initiatives”.

Star Media ventured into property development at the start of this year, and the taking up of a 13% stake in Matang will give it exposure to the plantation sector.

“At the end of the day, we still feel that by developing the land, it will bring Star Media more benefits, as the group will derive higher profits than merely disposing of the land to create long-term shareholder value,” Chor said.

Potential synergy between Star Media and Matang, says CEO

Meanwhile, Star Media group chief executive officer Alex Yeow suggested potential synergy between the two companies, when asked how Matang would benefit from Star Media taking up a stake in the company.

“On the corporate level, MCA has a controlling stake in Matang. So combining MCA and Star Media [stakes], the synergy as in alignment of any corporate decision will be simpler, because we do share a common shareholder. That will help decision-making.

“Star Media has significantly larger back office management resources, such as shared services, finance and legal and so on, which could complement Matang.

“With or without a controlling stake in Matang, I see potential synergy of cost savings if the two independent companies were to work together. We can definitely help to enhance value.

“Both companies hold a lot of cash. Matang has over RM100 million, while Star has over RM300 million. Collectively, we can have action in the market with this financial strength. If there is synergy, and it is approved by the board and shareholders [of both companies], there is a necessity to do so,” Yeow said.

Source: TheEdge - 1 Jun 2023

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