Instacom buying 35% of Neata for RM58.8mil

KUALA LUMPUR: Instacom Group Bhd has proposed to acquire a 35% stake in construction firm Neata Aluminium (M) Sdn Bhd for RM58.8mil, to be settled via the issuance of new shares, in a move the company says will diversify its earnings base.

Instacom will issue 309.47 million new shares at 19 sen each to Ang Li-Hann and his partners in Neata – Ooi Eng Kean, Nor Mohd Amin Shaharudin and Chia Kok Seng.

Ang, the biggest shareholder in Neata, will emerge as a substantial shareholder in Instacom.

The issue price represents a discount of 13.6% to Instacom’s five-day weighted average market price of 22 sen.

The exercise entails a proposed free warrant issuance of up to 210.67 million Warrants C on the basis of one free warrant for every five Instacom shares held.

Pursuant to the share sale agreement yesterday, the vendors of Neata have jointly agreed to provide a guarantee that the aggregate profit after tax of Neata shall not be less than RM34mil for the two financial years ending Dec 31, 2015 and FY16.

“Upon the completion of this corporate exercise, the Instacom group will have strategically diversified into new areas and viable businesses. This exercise forms part of a longer-term plan to strategically position Instacom on an even more solid and stable footing in terms of having sustainable and recurring revenue growth,” Instacom chief executive officer Anne Kung said.

The acquisition would diversify Instacom’s core business to include aluminium design and fabrication, and civil engineering and construction.

Neata is involved in the design and fabrication of aluminium structures, while its subsidiary, Vivocom Enterprise Sdn Bhd, is involved in civil engineering and construction.

For the six months ended June 30, 2014, Neata posted a net profit of RM5.09mil on a revenue of RM49.1mil.

In a separate statement, Instacom said it was confident that the acquisition would be beneficial to the group, given the strong track record of Neata-Vivocom, with its current order-book at close RM500mil and growing, and with further over RM1bil in the pipeline. The company targets to secure at least RM500mil in the foreseeable future and by the end of 2015.

“With this acquisition, there will be another stream of income, thus diversifying the earnings base, which is expected to enhance shareholder value,” she added.

Kung said the bonus issue was intended to reward its existing shareholders in line with the company’s robust growth and strong balance sheet.

“It’s going to be an exciting journey ahead for Instacom and we would like to thank all our valued shareholders for their loyalty and patience, as we embark on our long-term journey of sustainable growth and maximising shareholder value,” she added.