Pro-rakyat economists have called for urgent scrutiny of the proposed UEM Sunrise-Eco World merger. The main concern is, according to them, is the deal a way to bail out a highly indebted developer? I& #39;ll try and explain some of the key contentious issues about the merger.

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1) Loss of control. UEM Sunrise is technically the people& #39;s company through UEM Group vai Khazanah and also LUTH. A merger could dilute Khazanah& #39;s shares to about 40% from 66%, LUTH& #39;s to under 4% from 7%. EcoWorld will have about 24% of the combined entity.
*note that UEM maintains that it will remain in charge of the new entity although critics are challenging this. The latter claimed Eco World& #39;s management will lead. Critics thus ask why would Khazanah willingly cede control?
2) Eco World& #39;s debt pile. The developer& #39;s gearing ratio is at 78% (July 2019), or total debt of some RM3 billion against total equities of RM4 billion. Gearing ratio measures a firm& #39;s leverage by assessing its debt vs equities. If debt is higher than equities default risk rises
*Questions were raised as to why Khazanah would want to incur more debt. Indirectly, the new debt becomes our debt. There is also suspicion that Eco World needed Khazanah as a backer because they could borrow more.
*UEM Sunrise has much lower borrowings and also access to cheaper land. UEM Group, however, said Eco World& #39;s assets have potential despite its smaller landbank.
3) Why now? The timing of the merger is suspect. Critics of the merger said Khazanah would be investing in a high-end property company in the middle of a downturn. Then there is the question of who gets to stay and who or how many would be out of jobs.
4) Liew& #39;s history. The tycoon founded SP Setia but later sold it to PNB at RM3.95 per share. It& #39;s dropped to just 75 cents now, critics noted. Liew was also accused of poaching SP Setia& #39;s management and absorb them into Focal Aims Sdn Bhd, which was later renamed to Eco World.
*important to recall that the same had happened when UEM merged with Sunrise. Important because there seems to be a pattern here
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