Mercurius to buy 50% stake in Thai property developer

Singapore

MERCURIUS Capital Investment is looking to buy a 50 per cent stake in a Thai private property developer, Grand Bay Hotel, for more than 335 million baht (S$14.69 million) from Thailand-listed real estate developer Apex Development.

Mercurius will also jointly develop the Sheraton Phuket Grand Bay Resort in Phuket, Thailand, the Catalist-listed firm said in a filing on Monday.

Grand Bay owns several land parcels at Ao Po, Phuket, measuring about 56,496 square metres. The fair value of the parcels was 564.96 million baht as at Aug 30, 2018, based on the latest valuation report commissioned by Apex. The land parcels are mortgaged to KTB Securities (Thailand) for 800 million baht in credit facilities extended to Apex.

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 is transferred.

The 335 million baht amount comprises 310 million baht, which is 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 one paid by Aug 30. The final tranche of the sale shares will be transferred to Mercurius upon payment of the last instalment. The purchase price was arrived at after 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. Part of the 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 resort is part of an integrated development that includes residential properties, which are not under the JV. Mercurius and Apex 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 Apex's chief executive officer and a director of Apex.

Grand Bay's net loss was 600,000 baht for the fiscal year ended Dec 31, 2018. 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 Mercurius shares. Mercurius is negotiating with him on the commission amount. Mr Ng will also subscribe for 12.5 million placement shares in Mercurius for a total of S$500,000 under the S$6 million placement announced on Sunday.

On Monday, Mercurius shares closed flat at 4.2 Singapore cents.