KUALA LUMPUR: Information systems developer Orion IXL Bhd has obtained its shareholders’ approval to buy the entire equity interest in ASAP Bhd for RM73mil cash, which is seen as crucial to revitalise the company.
At the EGM on Tuesday, Orion's shareholders approved its corporate exercise to undertake a renounceable rights issue of 465.85 million new rights shares together with 232.93 million warrants to finance the purchase.
This would be on the basis of seven rights shares for every two existing Orion shares held on the entitlement date together with one free warrant for every two rights shares subscribed.
The issue price of the rights shares would be determined at a later date.
The vendors of ASAP are Datuk Paduka Mohamad Sharaff Mohd Shariff, Prabuddha Kumar Pronob Chakravertty and Lilibeth Gamboa Belinario.
ASAP is an information and communication technology (ICT) solutions provider and its primary software solution is its assets and facility management system, which similarly to the software solutions provided by Orion.
Both fall within the computerised maintenance management system (CMMS) market space.
ASAP’s client includes companies from various industries such as energy and utilities, healthcare, banking and financial services, education, property developers, mass rapid transport and public sector.
Orion CEO and executive director Abdul Rani Achmed Abdullah said both the Orion Group and ASAP provided solutions of similar nature.
Hence, the acquisition would allow the group and ASAP to explore the potential of harnessing each other’s technology, expertise and client base.
“Under the corporate exercise, ASAP has given Orion an RM7.5mil profit guarantee a year, or an RM15mil cumulative profit after tax for two years. This would help Orion to return to profitability,” he added.
The profit guarantee was derived after taking into consideration, amongst others, the audited profit after tax of ASAP of RM5.85mil for FY ended June 30 2016; the new projects secured and maintenance contracts entered into prior to signing of the conditional sale and purchase (SSA) agreement; and the existing management of ASAP would continue to be involved in the day-to-day operational and business activities of ASAP.
Orion had on Oct 17, 2016 entered into a SSA with ASAP to formalise the parties’ intention and understanding in relation to the proposed corporate exercise.
To recap, the corporate exercise is necessary to revitalise Orion with the entry of ASAP. Orion has been recording losses since FY Dec 31, 2013.
As such, Orion has been looking for opportunities and formulating measures to address and improve its financial performance.
The exercise is expected to improve the financial condition of the Group.
“The rights Issue with warrants would also raise RM3.5mil proceeds to be used for working capital of the enlarged Orion Group after the completion of the proposed acquisition,” he said.
Based on the pro forma consolidated statements of financial position of Orion Group as at Dec 31, 2016, acquiring ASAP which has an established profit track record will boost the group’s asset base by RM78.3mil.
This is expected to enhance Orion’s market share in the Malaysian CMMS market through the sharing of technology and resources, with the aim of integrating both Orion’s and ASAP’s solutions to increase competitiveness; and cross-selling between their customer networks.
This would improve the enlarged Orion Group’s profitability in the long run, which will translate to improved shareholder value.
Based on an estimated market size of about RM96.5mil in terms of revenue, Orion and ASAP have market shares of 3.5% and 9.0% of the CMMS market in Malaysia respectively in 2016.
The acquisition provides an opportunity for both companies to expand their combined market share.
This presents an opportunity for both companies to build and strengthen internal capability and operational track record in the provision of CMMS services.
“Through this acquisition, we would also potentially benefit from having access to the combined pool of customer segments.
Orion’s target customers are those who undertake asset maintenance works, including maintenance managers, electricians, engineers and contractors while ASAP considers asset owners as its main target customer segment.
"Orion’s system focuses on the building management and maintenance with extensive functions for maintenance operations,” he added.
Both companies target different customer segments across different industries.
The acquisition will enable the enlarged Group to leverage on each other’s networking connections to seek more potential demand for their range of products and services.
ASAP would be able to market the additional features and modules of its system to Orion’s customers and vice versa.
ASAP’s prospects in the CMMS market remains favourable taking into consideration the historical growth in the Malaysian CMMS market as well as ASAP’s competitive strengths.
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