KUALA LUMPUR: YTL Cement Bhd will dispose of its entire cement and ready-mixed concrete operations in Malaysia to its subsidiary Malayan Cement Bhd for a total consideration of RM5.158bil under an asset rationalisation and optimisation plan.
Under the agreement, Malayan Cement will acquire 12 companies involved in cement and ready-mixed concrete businesses, as well as YTL Cement’s marketing and plant management activities.
The RM5.158bil deal, which is subject to adjustments at point of completion, will be settled via RM2bil in cash, RM1.408bil through the issuance of 375.5 million new ordinary shares in Malayan Cement and RM1.75bil through the issue of 466.7 million new irredeemable convertible preference shares (ICPS) in Malayan Cement.
In a statement yesterday, YTL Cement said the issue price for the new Malayan Cement shares and ICPS to be issued has been fixed at RM3.75 apiece.
This is the price per share paid by YTL Cement for the acquisition of its 76.98% stake in Malayan Cement in 2019.
“Since the acquisition in 2019, the two groups have made significant strides in streamlining their operations and maximising efforts on their logistical, distributional and marketing fronts.
“This proposed transaction is the natural progression towards increasing the size of Malayan Cement’s cement and ready-mixed concrete businesses, bolstering profitability and value enhancement, ” YTL Cement said.
The company will continue to consolidate similar operating businesses under a singular umbrella.
“This is expected to further improve operational efficiencies and business outcomes.
“By leveraging shared expertise, experience and resources, Malayan Cement aims to eliminate overlapping functions whilst continuing to deliver seamless solutions to customers, achieving economies of scale and enhancing its market presence, ” it added.
YTL Cement explained that the partial settlement of the consideration through the issuance of new shares and ICPS would enable Malayan Cement to optimise its cash reserves and gearing levels.
The strategic realignment will foster value creation for shareholders of Malayan Cement and allow investors to invest directly on a focused basis in Malaysia’s leading building materials company, it said.
The exercise will also significantly reduce related party transactions and conflicts of interest between YTL Cement and Malayan Cement.
The proposed transaction is subject to approval by the shareholders of Malayan Cement.
YTL Cement’s shareholding in Malayan Cement will increase to 78.58% from 76.98% currently upon completion of the proposed transaction and the ongoing private placement of up to 85 million new Malayan Cement shares announced on April 15,2021, assuming no conversion of the ICPS to be issued.
Malayan Cement will apply to Bursa Malaysia for approval for a lower public shareholding spread of 20% in due course.