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Mercurius to buy 50% stake in Thai property developer, jointly develop Phuket resort

MERCURIUS Capital Investment is looking to acquire half of a Thai private property developer, Grand Bay Hotel, for more than 335 million baht (S$14.69 million), as well as to jointly develop the Sheraton Phuket Grand Bay Resort, a resort in Phuket, Thailand.

The Catalist-listed firm said in a bourse filing on Monday morning that it will buy a 50 per cent stake in Grand Bay from Thailand-listed real estate developer Apex Development.

Grand Bay owns land parcels at Ao Po, Phuket, held under the land title deeds 23710, 23711, 54006, 52371, 57204, and 33561, and measuring about 35.31 rai, or 56,496 square metres. The fair value of the parcels was 564.96 million baht as at Aug 30, 2018, based on the latest available valuation report commissioned by Apex in September 2018.

The land parcels are mortgaged to KTB Securities (Thailand) for 800 million baht in credit facilities extended to Apex.

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For the acquisition, Mercurius will pay some 335 million baht plus half of the construction and development costs for the Sheraton resort incurred after March 31 up until the date on which the final tranche of the sale shares has been transferred.

The 335 million baht comprises 310 million baht, representing half of the total value of the land parcels, plus 25 million baht, which is half of the construction costs already incurred by Grand Bay for the resort up to March 31.

The purchase price will be paid in four instalments, with the last instalment to be paid by Aug 30. The final tranche of the sale shares will be transferred to Mercurius upon payment of the last instament. The price was arrived at following arm’s length negotiations between Mercurius and Apex.

Mercurius will conduct private placement exercise(s) and public offerings to fund the acquisition.

On Sunday, it proposed a S$6 million share placement to 12 individuals, including existing shareholders. Part of the net proceeds raised from the placement will be used to fund the Grand Bay purchase.

Mercurius will also jointly develop the Phuket resort project with Grand Bay as the joint-venture (JV) vehicle. Upon completion, the resort will be operated by Starwood Asia Pacific Hotels & Resorts or its affiliates.

The Sheraton resort is part of an integrated development that also comprises residential properties, which are not part of the JV. Both companies will negotiate the option of bulk purchase by Mercurius for the remaining residential units of this development from Apex.

Grand Bay is 99.99 per cent-held by Apex, with the remaining 0.01 per cent owned by two individuals - Apex’s chairman and chief executive officer, as well as a director of Apex.

Grand Bay’s net loss was 600,000 baht for the fiscal year ended Dec 31, 2018, while its net book value and net tangible assets value each amounted to 343.3 million baht for FY2018.

On June 12, Mercurius and Apex also agreed in principle that they are interested in forming JVs for two mixed-use development projects at Yao Beach in Krabi, Thailand - the Club Med Krabi Resort and Residences, and the Sheraton Krabi Yao Beach Resort and Residences.

Apex was introduced to Mercurius by Dennis Ng Kok Kee, who owns business consultancy firm Treasure Pte Ltd. Mr Ng will be paid a commission in the form of shares in Mercurius, and Mercurius is still negotiating with him on the amount of the commission.

Mr Ng is also one of the placees of the S$6 million placement announced on Sunday, whereby he will subscribe for 12.5 million placement shares for a total of S$500,000.

On Monday morning, the company requested for its trading halt to be lifted.

Mercurius shares last traded on June 11 at 4.2 Singapore cents.