SPSetia/Mahsing ... Dec09

PNM will not be incorporating S P Setia or Mah Sing in its plan to form a mega property company that could be listed.

When PNB first mooted the idea of consolidating three property companies in its stable – Pelangi Bhd, Petaling Garden and the I&P – speculation was rife that the merger would also include S P Setia or Mah Sing.

The rumour mill was further fed by PNB’s steady acquistion of shares in S P Setia and Mah Sing. Currently PNB owns almost a third of S P Setia and 8.44% of Mah Sing. It could also use the listing status of eitehr S P Setia or Mah Sing to get its newly consolidated property company onto Bursa Malaysia while creating the single largest property developer in Malaysia.

As the consolidation exercise nears completion, however, a source says PNB will be leaving S P Setia and Mah Sing alone and list its property company separately.

Sources say the consolidation will not include S P Setia or Mah Sing. There will be a new entity emerging from Pelangi, Petaling Garden and I&P.

This is a much better idea for PNB as well as S P Setia and Mah Sing because it would not dilute the brand of the latter companies or rule out the possibility of joint venture agreements.

A joint venture agreement would be a win win situation for Mah Sing, S P Setia and the new company as it would give the developers access to PNB’s landbank, which amounts to some 7200 ha.

PNB’s move to increase its stake in S P Setia and Mah Sing can be viewed as an attempt to have more say on the board, particularly in getting decisions made, perhaps in steering the companies towards joint ventures with the newly consolidated entity.

Moreover, it may not be sensible for PNB to take over a company like S P Setia and merge it because this may impair its attraction as a top niche property player.