Firm proposes all-share deal for Hextar Fertilizers
PETALING JAYA: Hextar Industries Bhd
(HIB) is expanding operations in manufacturing and distributing fertilisers through its proposed acquisition of Hextar Fertilizers Ltd (HFL) from Hextar Holdings Sdn Bhd (HHSB) for RM480mil in a share exchange deal.
The purchase will be satisfied via the issuance of 1.6 billion new HIB shares at 30 sen each, HIB’s filing with Bursa Malaysia yesterday said. The new shares are priced at a discount to HIB’s last done price of 36 sen a share.
The deal will see HHSB’s stake in HIB rising to 77.3% from 45.7% now, requiring a mandatory general takeover offer for the remaining HIB shares.
Datuk Ong Choo Meng is the major shareholder of HHSB.
To comply with the requirement for a 25% share free float, HHSB has proposed to undertake an offer for sale of HIB shares via a private placement exercise, the filing noted. The sale could be of a minimum of 88.3 million to a maximum of 686.8 million HIB shares.
The proposed acquisition will enable HIB to increase its existing production capacity from 75,000 tonnes per annum to an aggregate of 679,000 tonnes per annum. It will also allow the group to tap into HFL’s extensive distribution network throughout Malaysia to expand its distribution base, HIB said in a statement yesterday.
The independent non-executive chairman of HIB, Datuk Chan Choun Sien, said the acquisition will provide the group with a larger access to an established distribution network and manufacturing facilities in Malaysia as HFL’s fertiliser operations are larger than that of HIB’s.
“This appropriation also comes with a profit guarantee of RM94mil over two financial years. With the purchase consideration being satisfied entirely in shares, HIB Group will be able to preserve its cash for its business operations,” he said.
He added the move will benefit HIB’s manufacturing facility in Sarawak, as the acquisition will allow for deeper expansion in its plant.
The deal is viewed as timely as it leverages on the rising demand for fertiliser, driven by the increasing commodity prices of crops.
Protégé Associate Sdn Bhd forecast the market size of the fertiliser industry in Malaysia to surge from RM4.72bil in 2021 to RM6.37bil in 2022.
“HIB registered a cumulative revenue of RM196.4mil for the three quarters ended May 31, 2022 with a profit after tax of RM5.7mil driven partly by higher demand of fertilisers in the fertiliser division,” the group said.
Ong stated the merger will also be beneficial for HIB as the strengths of HIB and HFL will be complemented to drive business growth of the enlarged HIB group.
“We will be able to leverage on our combined strengths in relation to management experience, market position, production capabilities and respective business relationships to create a more resilient platform to sustain continuous business growth.
“It will also pave the way for our eventual transfer to the Main Board which will enhance shareholders’ value further,” he said.
