HSS Engineers to acquire SMHB Engineering for RM270mil

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KUALA LUMPUR: HSS Engineers Bhd has proposed to acquire 100% of SMHB Engineering Sdn Bhd, an engineering consultancy company for RM270mil. 

In a filing with Bursa Malaysia, HSS Engineers said it had entered into a heads of agreement with Datuk Ir Teo Chok Boo, Ir Prem Kumar M.Vasudevan and Ir Syed Mohamed Adnan Mansor Alhabshi for the proposed acquisition of the entire issued share capital of SMHB Engineering, representing 100% equity interest for a purchase consideration of RM270mil. 

“The purchase consideration was arrived at after taking into consideration profit after tax of the SMHB group of approximately RM25mil and the Ebitda of approximately RM35mil for the financial year ended April 30, 2016,” HSS said. 

It added that the purchase consideration represents an enterprise value/Ebitda multiple of 7.7 times and P/E multiple of 10.8 times. 

“The board is of the view that the purchase consideration is justified because the resultant multiples falls within the range of listed companies involved in similar business,” HSS said. 

HSS said Teo, Prem Kumar and Syed Mohamed Adnan would receive cash and new HSS shares as payment for the SMHB Engineering stake. The proposed acquisition is expected to be completed in the first quarter of 2018.

The company said the proposed acquisition represented a strategic opportunity for the company to expand its engineering consultancy services and to make further inroads into the water resources and water supply development sectors.

“With the proposed acquisition, the company is able to further enhance its expertise and operations and scale up its resources especially its engineering and marketing resources, and exploit economies of scale which is expected to create synergies and enhance the company’s financials and in turn its shareholders’ value,” HSS said.

It added that proposed acquisition would combine the strengths of two leading Malaysian engineering consultancy firm which will strengthen the position of the enlarged HSS group to be a key contender to undertake projects not only in Malaysia but in the international market. 

“The order book of HSS group would increase significantly from approximately RM400mil currently to RM738mil post proposed acquisition. The proposed acquisition will also expand HSS’s current workforce from 600 to more than 1,000 employees with more than half of whom are professional engineers,” HSS said.