Eng Wah to sell theatre assets

Source : Straits Times - 26 Aug 2008

Founding Goh family agrees to pay $99.5m for the properties

CINEMA operator Eng Wah Organization is selling its cinema-related properties for $99.5 million to the founding Goh family - whose history of showing movies here dates back to the 1940s.

The sale is part of a $675 million deal that would radically transform mainboard-listed Eng Wah from a cinema company into a pharmaceuticals player.

This is being done by a reverse takeover of Eng Wah by Japanese biotech firm Transcutaneous Technologies inked in May last year - and part of that deal requires the sale of the cinema assets.

Yesterday, Eng Wah said it was selling Empress Theatre, Toa Payoh Entertainment Centre, Jubilee Entertainment Complex and the 16th floor at Orchard Towers for $99.5 million. The buyer is a company owned by Eng Wah founder Goh Eng Wah and his daughter, Eng Wah’s managing director Goh Min Yen.

A separate film distribution business owned by Eng Wah remains unsold.

Investors had initially welcomed the reverse takeover, involving a fresh, exciting business, as proceeds from the asset sale will be distributed to minority shareholders. Kim Eng Research has put a target price of $1.19 on the shares.

But investors have become increasingly concerned at the time that was being taken by Eng Wah to sell the properties.

Last Friday, the Securities Investors Association of Singapore raised concerns over a potential conflict of interest as the Goh family, the controlling shareholder, was said to be keen on the assets.

To this, Ms Goh told The Straits Times yesterday: ‘It’s up to the minority shareholders to vote as we (the family) are not voting. All these measures are safeguarding their interests.’

‘Our approach has been very transparent. We had engaged international firm Jones Lang Lasalle (JLL) to handle the sale. Some potential buyers couldn’t get financing because of the credit crunch. We are sticking our necks out and buying the properties at valuation and these were prices as of June,’ she added.

Ms Goh said: ‘Shareholders need to look at the big picture. We are doing the reverse takeover to unlock the value of the shares. One of the conditions is that we need to dispose of the properties and the cinema business. If we don’t do that, the deal cannot go through.’

Mr Goh, 85, a well known name in film circles, started showing movies at the now-defunct Gay World in Geylang back in the 1940s. Eng Wah was listed on the stock exchange in 1994.

In recent years the cinema industry has become tougher. Eng Wah still screens films at its own Toa Payoh and Jubilee cineplexes and at rented premises at Suntec, West Mall and Sun Plaza.

Last year, Eng Wah’s share price was languishing at about 35 cents.

This was not helped by Eng Wah’s ill-fated $7 million venture of bringing the Paris-based Crazy Horse risque stage show franchise to Clarke Quay.

However, last year’s pharmaceutical deal left investors hopeful that Eng Wah had secured a new lease of life.

Eng Wah would issue new shares to the Japanese shareholders who would pump the business into Eng Wah. The business involves ‘transdermal drug delivery’ - where drugs are administered via a skin patch instead of painful injections.

Once the deal is sealed, the Gohs will own only about 5 per cent of Eng Wah.

The firm blamed poor market sentiment for the delayed asset sales. JLL was appointed marketing agent last November for all properties. It approached global and local buyers but it seems only a buyer could be found for the Mandarin Theatre at $13 million. The poor response was due to what JLL ‘believes to be negative market sentiment and a depressed credit environment’.

When asked about the film business, Ms Goh said ‘the family has expressed interest in buying the movie business’.

Eng Wah will get a boost to its earnings per share of about 52.18 cents from this sale. Earlier this month, Eng Wah shareholders approved a capital distribution of 18.3 cents a share. Yesterday, the counter rose one cent to 95 cents.