This will increase Can-One’s shareholding in KJCFB to 33.39% from 32.90%, obliging it to extend a mandatory general offer (MGO) for all the remaining KJCFB shares not already owned by Can-One and its parties acting in concert for RM3.10 per KJCFB share.
Should this deal go through, it would enable the enlarged Can-One group to increase its market share in the can manufacturing business, thereby creating a major Malaysian can manufacturing player.
Meanwhile, the proposed acquisition is subject to the terms and conditions of the share sale agreement, Can-One said in a filing with Bursa Malaysia.
The purchase consideration of RM3.10 was arrived at on a willing buyer-willing seller basis after taking into consideration a few factors, which included the historical and prevailing market prices of KJCFB shares, and the audited net assets of KJCFB as at Dec 31, 2017 of about RM1.47bil.
This pricing also gives it an implied price-to-earnings multiple of about 15.31 times based on the audited consolidated profit after tax of KJCFB for the financial year ended Dec 31, 2017 (FY17) and an implied enterprise value/earnings before interest, tax, depreciation and amortisation multiple of about 10.24 times for FY17.
Should the proposals go through, Can-One’s gearing level will increase from 0.63 times to 2.41 times based on its FY17. Its cash and cash equivalents will increase to RM173.52mil from RM95.56mil.
In justifying the purchase consideration of RM3.10 per KJCFB share, Can-One said the acquisition would enable it and its subsidiaries to obtain control of the KJCFB group and become its controlling shareholder.
In the event the MGO is successfully undertaken, it would result in KJCFB becoming a subsidiary of Can-One.
“The strategic rationale is to allow the Can-One group to pursue its expansion strategy and long-term objective of evolving into a market leader in the can manufacturing industry, with opportunities for synergistic benefits arising from the consolidation with the KJCFB group,” it said.
KJCFB is principally involved in the manufacturing and distribution of tin and aluminium cans, as well as investment holding.
The Can-One group and KJCFB group are both principally involved in the can manufacturing business, mainly serving the food and beverage industry.
The proposals are undertaken by Can-One as part of its expansion strategy to consolidate the can manufacturing business under the KJCFB group to grow its sales and customer base, which will, in turn, improve the financial performance of the Can-One group.
Can-One said the proposals would create enhanced scale and synergies for the enlarged group through, among others, streamlined procurement from suppliers to negotiate for bulk discounts and improved operational efficiencies, resulting from economies of scale and integration.
It will allow the Can-One group to increase its range of products, namely, the manufacturing of two-piece aluminium cans as well as the manufacturing of corrugated box packaging undertaken by the KJCFB group, to meet its customers requirement of being a total service provider of cans and packaging products.
“With the larger combined asset base of the enlarged Can-One group, the group will also be able to gain better access to both debt and equity capital markets to fund its current and future business activities and expansion,” it said.
Barring any unforeseen circumstances and subject to all required approvals being obtained, the proposals are expected to be completed in the first half of 2019.