Denko proposes to acquire chairman-owned firm for RM1.19bil

  • M&A
  • Monday, 23 Oct 2017

Production floor used for hihgh precision plastic injection moulding process.

KUALA LUMPUR: Denko Industrial Corp Bhd executive chairman and controlling shareholder Datuk Seri Foo Chee Juan plans to inject his privately-owned plastic injection moulding firm into Denko for an indicative price of RM1.19bil.

In a filing with Bursa Malaysia, the precision plastic injection moulded parts maker said it had inked a heads of agreement with Foo and Datuk Fong Chiu Wan to buy Integrated Manufacturing Solutions Sdn Bhd (IMS), to be paid with 1.03 billion new Denko shares at an issue price of RM1.15 apiece.

The two vendors will end up with about 90% of the shares in Denko even taking account the implementation of its other proposal on Monday - a private placement of 10.45 million new Denko shares.

Foo, who made a mandatory takeover offer (MTO) for Denko at 60 sen per share earlier this year, had then stated that he would like to maintain the company’s listing status. The MTO received lacklustre response, and Foo currently holds 52.23% in Denko via 99.9%-owned vehicle Oregon Technology Sdn Bhd.

On the rationale for the purchase, Denko said it and IMS were both in the plastic injection moulding business serving the same category of customers in the electrical and electronics industry. 

“The proposed acquisition is undertaken by Denko as part of its plastic injection moulding business expansion strategy to grow its revenue and customer base, and to expand its production capacity, which in turn will improve its financial performance,” it said.

The IMS group posted a consolidated profit after tax of RM79.13mil for the financial year ended March 31, 2017, while its net assets stood at about RM208.40mil.

Denko, meanwhile, incurred a group loss after tax of RM11.29mil for the same financial year, compared to a profit of RM2.99mil in the preceding year.

Meanwhile, the private placement, at an indicative issue price of RM1.15 per share, is expected to raise RM12.01mil in gross proceeds, most of which (RM6.87mil) will be used as working capital. A further RM5mil will be used to part finance the purchase of new machinery worth RM17.4mil.
Trading in Denko shares has been suspended since 3.22pm on Friday, with the last traded price being RM1.28. The company's shares will resume trading on Tuesday.
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