Malaysia's state fund manager weighs merging property units-source

KUALA LUMPUR, April 28 Mon Apr 28, 2014 3:06am EDT

KUALA LUMPUR, April 28 (Reuters) - Malaysian state asset manager Permodalan Nasional Bhd (PNB) is considering a proposal to merge four of its portfolio companies to form Southeast Asia's second largest property firm by assets, a source with direct knowledge of the matter said.

The proposal comes as Malaysia faces a slowdown in the property market after the government imposed a series of curbs to rein in surging housing prices, mimicking efforts taken by several other Asian countries including Singapore and China.

The softer real estate market has depressed property stocks, giving PNB an opportunity to wrest control of its property units and try and maximise investment returns, the person added.

PNB, which manages about $73 billion, started restructuring its property portfolio in 2009.

The merged entity, with at least 41 billion ringgit ($12.5 billion) under assets, will be Southeast Asia's largest real estate developer after Singapore's CapitaLand Ltd.

Under the proposed deal, PNB could pay about $1.3 billion to take control of its portfolio companies Sime Darby, S P Setia, Eastern & Oriental Bhd and merge it with private company I&P Group Sdn Bhd, said the source, who declined to be identified as the information is not public.

The merged entity could take the form of a listed company or property trust, or could even stay private, the source said, adding that the plan is still in its early stages and subject to changes.

Officials at PNB, Sime Darby, Eastern & Oriental and I&P Group did reply to requests for comment. S P Setia officials declined to comment.

The move comes in line with Malaysian Prime Minister Najib Razak's initiative to increase local companies' exposure to Southeast Asia's fast-growing economies. PNB could end up with a land bank of 27,960 acres (11,315 hectares), with properties spread across major cities in Malaysia and also in London's Battersea Power Station area.

The plan to build a mega property firm started in 2009 when PNB merged three property developers into I&P Group after buying Pelangi Bhd, Island and Peninsular Bhd and Petaling Tin Bhd for 1.43 billion ringgit. ($1 = 3.2700 Malaysian Ringgits) (Reporting by Yantoultra Ngui; Editing by Stuart Grudings and Miral Fahmy)

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