E&O sells Lone Pine Hotel in Penang for RM85mil

Lone Pine Hotel's famed lawn and new block in the background

KUALA LUMPUR: Eastern & Oriental Bhd (E&O) is selling its entire stake in E&O Express Sdn Bhd, the owner-operator of Lone Pine Hotel in Batu Feringghi, Penang, for RM85mil.

E&O announced to Bursa Malaysia that its unit Eastern & Oriental Hotel Sdn Bhd had inked an agreement to sell all its 10 million RM1 ordinary shares and 41,500 10-sen preference shares in E&O Express to duty-free goods trader Langkawi Saga Shopping Centre Sdn Bhd and liquor and cigarette wholesaler Lubritrade Trading Pte Ltd.

The RM85mil purchase consideration includes the settlement of the redemption sum owing by E&O Express to a local financial institution (unnamed in the statement) as at March 31 (RM21.84mil), settlement of inter-company loan owing to Eastern & Oriental Hotel as at March 31 (RM11.09mil), and share purchase (RM52.07mil).

The amounts stated are subject to final confirmation from the financial institution and Eastern & Oriental Hotel as at the date of the sale’s completion, which is forecast to be by October.

If the amounts vary, the balance consideration payable for the E&O Express shares will be adjusted to reflect that.

E&O Hotel will use the proceeds mainly for working capital and/or repayment of bank borrowings. As at March 31, the total bank borrowings of the E&O group amounted to RM1.52bil.

E&O said assuming that the proceeds from the proposed sale were used to pare down borrowings, the annual interest savings was expected to be RM4.6mil based on an average interest rate of about 5.5% per annum.

The E&O group’s cost of investment in the shares being sold is RM51.5mil, and it expected to realise an estimated gain on disposal after taxation of about RM23.3mil.

“The proposed sale is in line with the group’s strategy of strengthening the balance sheet via realising cash resources which can then be deployed in identified projects and investments to maximise the returns of the E&O group and/or for repayment of borrowings,” the company said.