KUALA LUMPUR (May 9): Food packaging manufacturer SCGM Bhd has sealed a conditional share sale agreement to sell its core plastic packaging business to two Japanese firms, Mitsui & Co and FP Corp (FPCO), for RM544.38 million cash.
Of the proposed proceeds of RM544.38 million, SCGM said in a filing with the stock exchange that RM425.56 million has been earmarked for a proposed distribution to its entitled shareholders within nine months.
For illustration purposes, the proposed distribution entails capital reduction and repayment of 36 sen per share, and proposed special dividend of RM1.85 per share. In total, shareholders will receive RM2.21 per share.
The company's share price last traded at RM2.38 last Friday (May 6) for a market capitalisation of RM461 million.
The proposed divestment entails the sale of equity stake in Lee Soon Seng Plastic Industries (LSSPI), which houses the plastic packaging operation.
Mitsui will purchase a 60% equity interest or 63.88 million LSSPI shares for RM326.63 million cash while FPCO will take up the remaining 40% stake or 42.59 million shares for RM217.75 million cash.
SCGM said the board intends to maintain the listing status of the company. Upon completion of the divestment, it will look out for new core business to sustain its ongoing concern.
It said the board will seek the exchange's concurrence on whether the company will be deemed as cash company under Paragraph 8.03 and PN16 of the Listing Requirements after the completion of the proposed disposal and use its best endeavours to identify potential new business and/or assets to be acquired.
Some RM84 million would be allocated for acquisitions of new business or assets to be identified or working capital within 24 months, RM18.8 million for transfer of properties immediately upon completion of the proposed disposal to the purchasers and the balance RM16 million to defray estimated expenses for the exercise.
The sale consideration represents an implied enterprise value/earnings before interest, tax, depreciation and amortisation (EV/EBITDA) of approximately 10.6 times, computed based on RM55.48 million EBITDA for the financial year ended April 30, 2021 (FY21) of LSSPI.
The disposal price tag also represents an implied price-earnings ratio of 16.03 times based on profit after tax of approximately RM33.95 million in FY21.
SCGM is expected to record a net gain on disposal of roughly RM393.69 million.
"This is an opportunity for SCGM to unlock the value of our investment in LSSPI over the past 38 years. At the same time, it allows shareholders to partially realise their investments in the company in cash, as SCGM intends to distribute part of the proceeds to all entitled shareholders," said its managing director Datuk Seri Lee Hock Chai in a statement.
As part of the proposed disposal, LSSPI also entered into a conditional sale and purchase agreement with SCGM for the transfer of three contiguous parcels of land with factory buildings and other ancillary buildings located in Mukim Senai, Kulai, Johor for RM18.8 million cash.
The proposed disposal of LSSPI is subject to approval by at least 75% of the total number of issued shares held by SCGM shareholders at an extraordinary general meeting to be convened, and any other relevant authorities and/or parties if required.
However, the transfer of properties does not require approval by SCGM shareholders.
Both Mitsui and FPCO are listed entities on the Tokyo Stock Exchange of Japan.
Mitsui is a global trading and investment company and has a diversified business portfolio that spans approximately 63 countries in Asia, Europe, North, Central and South America with a core business portfolio covering mineral and metal resources, energy, machinery and infrastructure, and chemicals industries.
FPCO was incorporated in Japan on July 24, 1962 as Fukuyama Pearl Paper Manufacturing Corp and subsequently changed its name to FP Corp on Jan 1, 1989. FPCO is principally involved in manufacturing and marketing of disposable food containers made of polystyrene and other compound resins as well as marketing of related packaging materials.
Barring unforeseen circumstances, both exercises are expected to be completed by the third quarter of 2022.
Source: TheEdge - 10 May 2022
