PETALING JAYA: 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 a 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.
Out of this, RM113.69mil will go towards Ladang Ternakan Kelang to help fund its purchase of the operations.
Subsequently, there will be a proposed consolidation of two existing LTKM shares into one share.
Local Assembly, an EMS provider, will become a wholly-owned subsidiary of LTKM while the vendors of Local Assembly will become LTKM’s controlling shareholders with a 56.6% equity interest in the company following the proposed acquisition and proposed restricted issue.
Meanwhile, LTKM also proposed to acquire 100% equity interest in Local Assembly for RM336mil.
This 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 (FY22), or not less than an aggregate of RM50mil PAT for FY22 and FY23.
Based on the guaranteed PAT of RM28mil for FY22, the purchase consideration represents a price to earnings multiple of 12 times.
The application for the proposals is expected to be submitted to the relevant authorities by the second quarter of 2022.
Subject to approvals from relevant parties including the Securities Commission, Bursa Malaysia as well as shareholders of LTKM, the proposals are expected to be completed in the first half of 2023.
M&A Securities Sdn Bhd is adviser to LTKM for the proposals.
Local Assembly, which started operations in 2000, is a manufacturer of electronic, electrical and plastic injection moulded components, and sub-contract assembler of electrical appliances and equipment.
Its principal markets are Malaysia and Singapore.
For the financial year ended Dec 31, 2021, Local Assembly achieved a PAT of RM20.06mil on the back of a revenue of RM116.35mil.