Denko buys moulding manufacturer for RM1.19 billion

PETALING JAYA: Denko Industrial Corp Bhd is acquiring the entire stake in plastic injection moulding firm Integrated Manufacturing Solutions Sdn Bhd (IMS) for RM1.19 billion, which will be satisfied with the issuance of 1.03 billion new shares at an issue price of RM1.15 apiece.

The indicative purchase sum was derived based on a 15 times multiple on IMS’s audited consolidated profit after tax of RM79.13 million for the financial year ended March 31, 2017. Its net assets stood at RM208.38 million in the same period.

Denko said in a filing with the stock exchange yesterday that it had on Oct 23 entered into a heads of agreement with Datuk Seri Foo Chee Juan and Datuk Fong Chiu Wan for the proposed acquisition.

This is a related party transaction as both Foo and Fong are the major shareholders of Denko. An independent adviser will be appointed prior to the execution of the definitive agreement to advise the noninterested shareholders and directors of Denko on the fairness and reasonableness of the proposed acquisition.

Both IMS and Denko are both in the plastic injection moulding business serving the same category of customers in the electrical and electronics industry.

“The proposed acquisition is undertaken by Denko as part of its plastic injection moulding business expansion strategy to grow its revenue and customer base, and to expand its production capacity, which in turn will improve its financial performance,” it noted.

Separately, Denko proposes to undertake a private placement to raise up to RM12.01 million for working capital and capital expenditure, including the purchase of raw materials and components, trade payable to supplier and payment of staff overheads.

The proposed private placement involves the issuance of up to 10.45 million new shares, representing up to 10% of the existing total number of issued shares.

Trading in Denko shares was suspended yesterday pending the material announcement. The stock closed at RM1.28 last Friday.