KUALA LUMPUR: LTKM Bhd
has put forward a series of proposals to divest its existing business to its major shareholder and venture into the provision of electronic manufacturing services (EMS) via the acquisition of Local Assembly Sdn Bhd.
In a statement, loss-making LTKM proposed that its major shareholder with 71.6% stake, Ladang Ternakan Kelang Sdn Bhd, acquire its chicken egg production operations for RM158.83mil.
This will be accompanied by a proposed special dividend and capital repayment of RM1.1098 per share to shareholders amounting to RM158.83mil, following which Ladang Ternakan Kelang will use its RM113.69mil portion of the dividend to help fund its purchase of the operations.
Subsequently, there will be a proposed consolidation of two existing LTKM shares into one share.
Meanwhile, LTKM also proposed to acquire 100% equity interest in Local Assembly for RM336mil, which will be satisfied via RM100mil cash and the issuance of 393.33 million new LTKM shares at an issue price of 60 sen apiece.
The vendors will provide a profit guarantee of a minimum profit after tax (PAT) of RM28mil for the financial year ending Dec 31, 2022, or not less than an aggregate of RM50mil PAT for the financial years ending Dec 31, 2022, and 2023.
Based on the guaranteed PAT of RM28.00 million for the financial year ending 31 December 2022, the purchase consideration represents a price to earnings multiple of 12 times.
Post-acquisition, there would be a proposed restricted issue of 230 million new LTKM shares at an indicative issue price of 60 sen apiece, representing 33.1% of the enlarged share capital of LTKM to investors yet to be identified, which would help to meet public shareholding spread requirements.
The vendors of Local Assembly - comprising Chai Voon Sun, Gurmakh Singh Ajmer Singh, Wee Thian Song, Divine Inventions Sdn Bhd and Proven Venture Sdn Bhd - will become the new controlling shareholders of LTKM with a 56.5% stake in the company. By virtue of his shareholding in Divine Inventions, Datuk Seri Chiau Beng Teik, executive chairman of Chin Hin Group Bhd, will emerge as the major shareholder of LTKM.
LTKM proposed that the company name be changed to LA Technology Bhd following the completion of the exercise.
"At its core, the proposals seek to reward our shareholders from the proceeds of the disposal of the Company’s existing poultry business while at the same time, allow them to continue participating in the new EMS business following the proposals," said LTKM executive chairman Datuk Tan Kok in a statement.
He said the proposed disposal comes amid a challenging operating landscape that has impacted the company's ability to pay dividends over the past two financial years.
These challenges to the poultry industry, he said, include overcapacity, lower average selling price of eggs, high raw material prices and difficulty in controlling disease outbreaks.
“Concurrent with the proposed disposals, we believe the proposed acquisition of the EMS business is an opportunity to create value for our shareholders through a business that is viable and profitable," he added.
Local Assembly, which started operations in 2000 and whose principal markets are Malaysia and Singapore, is a manufacturer of electronic, electrical and plastic injection moulded components, and sub-contract assembler of electrical appliances and equipment.
For the financial year ended Dec 31, 2022, Local Assembly achieved PAT of RM20.06mil on the back of revenue of RM116.35mil.
According to LTKM, the application for the proposals is expected to be submitted to the relevant authorities by the second quarter of 2022.
Subject to regulatory and shareholder approvals, LTKM expects the proposals to be completed in the first half of 2023.
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