IOI maintains stand on deal turned sour

This is written by my colleague June Ramlee.

KUALA LUMPUR: IOI Corp Bhd, which stands to lose an RM83 million deposit to Dutaland Bhd from a deal turned sour, yesterday insisted that the latter had breached their sale and purchase agreement.

Dutaland, however, maintained that it had not acted in breach of the agreement relating to a piece of plantation land.

IOI previously announced that it had terminated the agreement to buy 11,977.91ha of oil palm plantation land in Sabah from Dutaland for RM830 million. IOI then said the cancellation was "due to non-compliance of certain terms and conditions".

On July 28, 2011, IOI's unit Sri Mayvin Plantation Sdn Bhd had signed the deal with Dutaland's unit Pertama Land and Development Sdn Bhd. Yesterday in a filing to Bursa Malaysia, IOI maintained that Dutaland, among others, had failed to continue upkeeping and maintaining the properties. It also claimed that there were discrepancies in the particulars relating to the properties, and that Sri Mayvin had communicated the alleged breaches to Pertama Land.

Dutaland, in its latest filing to the stock exchange, said Pertama Land had consistently maintained that it was not in breach of the agreement as alleged. There had also "been non-compliance on the part of Pertama Land under the agreement as alleged or at all by Sri Mayvin", it added.

Meanwhile, analysts said there will be a minimal impact on IOI's overall earnings if it loses its RM83 million deposit from the deal inked with Dutaland Bhd a few months ago. This is because IOI is a cash-rich company with profits of close to RM2 billion to RM3 billion a year.

Losing the RM83 million deposit on that deal would not make a big difference as the potential loss will only lower its earnings by three to four per cent, said several analysts when contacted by the Business Times yesterday.

"It's too early to say (if the deposit will not be returned) but if they can prove that it is non-compliance, then they should be able to get their money back. But if they lose their deposit, then there would be minimal impact on the company as it makes RM2 billion in profits in a year, so it won't hurt much," said one analyst.

It will not be the first time IOI will lose its deposit. In 2008, the company had forfeited its deposit of RM73.4 million after it walked away from buying Menara Citibank.

Analysts, however, said the Citibank and the Dutaland deals cannot be equated, given that the company had decided to walk away from the former deal.

Dutaland earlier said it was seeking legal advice and had notified OSK Trustees Bhd not to remit to Sri Mayvin the deposit of RM83 million being the 10 per cent deposit paid by Sri Mayvin under the agreement and any interest accrued.

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