Eng Wah to sell theatre assets

Aug 26, 2008
Eng Wah to sell theatre assets
Founding Goh family agrees to pay $99.5m for the properties
By Lee Su Shyan, Assistant Money Editor

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.