Federal Furniture eyes expansion into construction

INSIDE THE INTERIOR DESIGN WORLD. FEDERAL FURNITURE HOLDINGS (M) BHD MANAGING DIRECTOR CHOY WAI HIN WITH THE WIDE RANGE OF FURNITURE BY FEDERAL FURNITURE.

KUALA LUMPUR: Federal Furniture Holdings (M) Bhd (FFHB) is proposing to diversify into the building construction business by acquiring a 60% stake in Pembinaan Masteron Sdn Bhd (PMSB) for RM33mil.

In a filing with Bursa Malaysia on Friday, the furniture manufacturing and interior fit-out firm said PMSB is the construction arm of the Masteron group which is involved in property development, construction, property investments and hotel investments.

Currently, PMSB has five main projects -- all located in the Klang Valley -- with total contract value of over RM355mil.

PMSB’s vendors are FFHB chairman Datuk Choy Fook On and his family members, including FFHB executive directors Datin Tan Geok Foong and Datuk Choy Wai Ceong and managing director Datuk Choy Wai Hin.

FFHB said the purchase consideration would be satisfied via RM6mil in cash and 270 million new FFHB redeemable convertible preference shares (RCPS) of 10 sen each.

On the rationale for the acquisition, FFHB said the group was expected to derive synergistic benefits from it as building construction would complement its current core activities.

“Such benefits will enhance the enlarged group’s competitiveness in new project tendering covering both construction and interior fit-out works, with the additional resources and project management capabilities arising from the proposed acquisition,” it said.

PMSB made a profit after tax of RM5.52mil on revenue of RM147.12mil for the financial year ended Dec 31, 2015. 

The vendors jointly and severally guarantee to FFHB that PMSB will make a profit after tax (PAT) of not less than RM20mil for the financial years ending Dec 31, 2016 to 2018. The PAT is also guaranteed to be not less than RM7mil for FY16.

On the RCPS to be issued to the vendors, FFHB said the preference shares would have a 10-year tenure and a dividend rate of up to 8% per annum (at the sole discretion of FFHB). The conversion price will be determined later.

As the RCPS does not carry any right to vote at any FFHB general meeting of FFHB save for certain circumstances, the issuance of the RCPS to the vendors, who are also directors and/or major shareholders of FFHB or person connected with them, is not expected to trigger the obligations for the vendors to extend a mandatory takeover offer for the remaining FFHB shares.

However, FFHB said, should the aggregate shareholdings of FFHB shares held by the vendors and persons acting in concert with them increase by more than 2% of FFH’s issued and paid-up share capital of FFHB in any six-month period as a result of exercising the conversions rights into new FFHB shares, they may be required to undertake a mandatory take-over offer on the said conversion.