Metrod buys 5-star Goa hotel for RM331mil

Company says buy does not mean it is exiting copper business

PETALING JAYA: Metrod Holdings Bhd is acquiring a five-star hotel in Goa, India, for RM331.2mil, as the copper rod producer seeks to diversify its business.

The company said the investment in Ceres Hotel Pte Ltd, the owner of The Leela Goa, does not mean it is exiting the copper business.

In its filings with Bursa Malaysia, Metrod said it had, together with its unit Metrod Holdings (Singapore) Pte Ltd and its major shareholder MetTube Sdn Bhd, and wholly owned subsidiary MetTube International Pte Ltd, entered into a supplemental conditional subscription agreement to invest in Ceres for a total subscription price of 5,199.9 million rupees (RM331.2mil).

The proposed subscription entails the subscription of a 100% equity interest in Ceres for about RM171.7mil and the compulsorily convertible debentures (CCDs), which carry an annual coupon rate of 11% per annum, for RM159.5mil.

The effective group shareholding in Ceres shall be subject to Metrod and/or its wholly- owned subsidiary holding a 51% equity interest or more in Ceres and MetTube, and/or its wholly-owned subsidiary holding 49% or less at any point of time.

Metrod said the proposal to buy into Ceres would have minimal impact on the group’s net assets, but increase its gearing to 1.17 times from 0.63 times prior to the deal.

Metrod first announced its proposal to invest in Ceres on Sept 23. It had then noted that MetTube Singapore was a wholly owned subsidiary of MetTube while MetTube was a major shareholder of Metrod.

As such, the group said, the proposed subscription was deemed a related-party transaction.

Metrod said the new business was expected to contribute more than a quarter of its net profit, as well as the diversion of more than 25% of the net assets of the company.

“The board intends to continue with Metrod’s existing business in the same manner,” it pointed out.

The company said MetTube Singapore and Ceres had entered into a conditional business transfer agreement, together with ancillary agreements, to acquire the hotel business, including the hotel property known as “The Leela Goa” from Hotel Leelaventure Ltd for 7.25 billion rupees (RM467.4mil) cash on Sept 19.

On Oct 7, Ceres obtained a term loan of 2,500 million rupees (equivalent to RM159.2mil) to part-finance the consideration to be paid for the business transfer agreement.

Metrod’s shares closed unchanged yesterday at RM1.90.

The company saw its net profit increase almost seven-fold to RM12.1mil in the first six months of 2015 from RM1.8mil in the corresponding period last year due mainly to exchange translation gains. This raised its earnings per share to 10.05 sen from 1.49 sen previously.

During the period in review, Metrod’s revenue rose 2.4% to RM837.7mil from RM817.7mil previously on higher sales volume.

The group remained cautious on its prospects this year due to currency volatility; weak copper prices; risks of a slowdown in China and slow recovery in the European Union and United States, which could impact exports; and stiff competition. Metrod, however, stressed it was well-prepared to mitigate the challenging environment.