CMS to Dispose 2% Equity in its Quarry and Construction Business to SEDC

Enhancing Public and Private Sector Collaboration

Kuching (Sarawak), Friday, 28 August 2020 –  Cahya Mata Sarawak Berhad (“CMS” or “the Group”) today announced that it had entered into Shares Sale Agreements with its long-time joint venture partner, Sarawak Economic Development Corporation (“SEDC”), for the proposed disposal of 2% equity interest in Group subsidiaries, CMS Resources Sdn Bhd (“CMSR”) and PPES Works (Sarawak) Sdn Bhd (“PPESW”) for a total cash consideration of RM17.5 million (“the transaction”). The transaction will effectively lower CMS’ stake in each of these two subsidiaries to 49%, while SEDC will have a 51% controlling stake in both these companies.

CMS and SEDC have a long-standing collaboration over the last 27 years. This successful long-standing private-public partnership has brought about much economic progress for Sarawak particularly in terms of the state’s infrastructural development. The transaction is a step in the right direction given the new role that the State Government has entrusted on SEDC to play a more direct and catalytic role in the economic development of Sarawak including the change in quarry licencing policy requiring SEDC to have a stake in all quarries in the State. Importantly, SEDC has assumed the mantle of the State Government’s partner in the economic development of Sarawak.

Pursuant to the transaction, all of CMSR’s quarry-related operations and PPESW’s construction operations, including its road construction activities, will come under the direct control of SEDC. CMS, however, will continue to manage CMSR’s and PPESW’s day-to-day operations until such a time when SEDC may introduce changes to align the management of the two companies with the management of the SEDC group.

Commenting on the exercise, was CMS Group Managing Director, Dato Isaac Lugun, who had this to say: “It is a known fact that the quarry and construction industries are primarily driven by the government especially licencing and roll-out of mega projects.  At the same time, the government relies on those companies with the necessary expertise to drive growth and development in these areas.

It is therefore imperative that both CMS and SEDC, for our mutual benefit, continue to strengthen our collaboration and find new ways to create additional value for both parties and the people of Sarawak. This exercise is a positive step towards cementing the Group’s ongoing strategic collaboration with the State. Furthermore, it also places CMS on a stronger footing to capture business opportunities particularly at the time when several mega infrastructure projects are underway or in the pipeline.”

“The transaction cements the marriage of strength and a realignment of our business strategy moving forward. SEDC has the necessary platform while CMS possesses industry knowledge and a healthy balance sheet. These elements constitute a strong rationale for the disposal and we look forward to continuing our long and fruitful relationship with SEDC.” concluded Dato Isaac Lugun.

The parties target to complete the transaction by end of the year.