KPJ Healthcare Bhd through its subsidiaries Jeta Gardens (Qld) Pty Ltd (Jeta Gardens) and its wholly-owned subsidiary, Jeta Gardens Aged Care (Qld) Pty Ltd (JGAC) had yesterday entered into a business sale and purchase agreement (BSA) with DPG Services Pty Ltd to dispose its aged care business for RM2.148 million (AUD 700,000) cash payable by the vendors.
The BSA vendors, Jeta Gardens and JGAC are 57.16%-owned subsidiaries of KPJ held through Kumpulan Perubatan (Johor) Sdn Bhd (KPJSB), involved in residential care services and retirement village business.
This agreement involves the disposal of the business conducted by KPJ, encompassing specific assets and liabilities associated with the operation of residential aged care services at Jeta Gardens Aged Care Facility.
“The net cash payment represents the difference between the Asset Sale Value and the liability assumed by the purchaser, DPG,” it said in a Bursa listing today (Dec 13).
Simultaneously, Al Aqar Australia Pty Ltd, a wholly-owned subsidiary of Al-`Aqar Healthcare REIT (Al-`Aqar) has entered into a land sale contract (LSC) with Principal Healthcare Finance Pty Ltd (“Principal Healthcare”) to dispose of the lands and buildings of Jeta Gardens Aged Care Facility with the disposal consideration amounted to approximately RM74.9 million (AUD24.4 million cash).
“This will be utilised for apportionment to Jade Aged Care Facility, buildings owned by Jeta Gardens (as defined below), capital recycling and/or redemption of Al-`Aqar’s financing facilities as well as related expenses.
“Barring any unforeseen circumstances and notwithstanding the longer timeframe permitted under the LSC (subject to terms and conditions of the LSC) the proposed disposal is anticipated to be completed in the second half of 2024,” Al-`Aqar said in a statement.
It said that the LSC and the BSA are interdependent, and as such, the proposed disposal is deemed a related party transaction under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.
The BSA consideration of RM2.148 million was arrived at on a willing-buyer willing-seller basis, after taking into consideration, the sale value of assets to be disposed of is AUD15.5 million (equivalent to RM47.568 million), the liability assumed by the purchaser, equivalent to RM49.716 million, and the rationale for the proposed disposal.
KPJ said the reason behind the proposed disposal is Jeta Gardens Group has been loss-making, heading to exit from aged care business.
It had recorded annual losses after taxation ranging from AUD4.814 million to AUD10.554 million (equivalent to RM14.774 million to RM32.389 million).
“Its net liabilities range from AUD20.017 million to AUD31.881 million (equivalent to RM61.430 million to RM97.840 million) for the past 3 financial years from 2020 to 2022.
“(The proposed disposal) will enable Jeta Gardens to exit the aged care business which has been loss-making and facing challenging business prospects,” KPJ said.
KPJ said it has been providing financial support to Jeta Gardens when necessary to enable the Jeta Gardens Group to meet its liabilities as and when they fall due.
“By removing the underperforming aged care business, the KPJ Group can reduce its operating costs and cash flow requirements…and will be able to redirect its resources to other business segments which are profitable.
“It will also allow KPJ’s exit while maintaining the continuity of the aged care facilities for the residents in a socially responsible manner and ensure the wellbeing of the residents are unaffected by the disposal.
Jeta Gardens and Al-‘Aqar Australia Pty Ltd (AAA), wholly-owned subsidiary of Al-‘Aqar, currently has an existing headlease from with an expiry on 1 November 2110.
“In the event that the completion of the business sale agreement is ahead of the completion of the land sale agreement, the vendors will enter into a sublease agreement of the area demarcated in respect of the aged care property with the purchaser.
“On completion of the land sale agreement, both the headlease and sub-lease of the aged care property will be terminated,” it added.
There is also an escrow deed with the vendors, AAA, DPG Services, Principal Healthcare and escrow agent, namely Thomson Geer Lawyers to govern the execution of the obligations stipulated under both agreements (business sale and land).
The BSA is expected to completed from 31 January 2024, or a later date (with notice by purchaser on or before 15 January 2024), in which the parties may agree in writing, provided that the day is the last day of a calendar month.
