Nexgram sells its 70% stake in Blue Hill for RM2

> Firm says it is entitled to claim for breach of profit guarantee due to losses made by the latter

PETALING JAYA: Nexgram Holdings Bhd is selling its 70% stake in Blue Hill Development Sdn Bhd, a construction company that it acquired in 2016 for RM12.5 million, for RM2.

In a filing with Bursa Malaysia yesterday, the group said it is entitled to claim for breach of profit guarantee for the total sum of RM7.25 million due to the losses made by Blue Hill.

Nexgram’s wholly owned subsidiary Nexgram Land Sdn Bhd entered into a conditional share sale agreement on July 4, 2018 with Maniam Mohandas Govindasamy to dispose of its 70% stake in Blue Hill.

“The disposal is to streamline the business activities of the group, as the group discover some difficulties in dealing with the remaining shareholder of Blue Hill to compromise in the management’s decision making,” it said.

In addition, the group did not have any representative as director in Blue Hill since the 70% stake was acquired. The remaining 30% stake was held by a Lau Tian Kit.

The total cash consideration of RM2 takes into consideration the net liability value of RM9.63 million based on the audited financial statements for the financial period from Oct 1, 2016 till July 31, 2017.

Upon completion of the disposal, Blue Hill will cease to be a sub-subsidiary of Nexgram.

Blue Hill is principally engaged in building construction and housing development.

To recap, Nexgram Land acquired the 70% stake in Blue Hill from Spacious Glory Sdn Bhd for RM12.5 million in April 2016. The acquisition was completed on July 4, 2016. The shareholders of Spacious Glory were Lau and Lim Kim Lee, each with a 50% stake.

The RM12.5 million price tag took into consideration te future earnings potential of Blue Hill, comprising unbilled contracts worth about RM60 million and a profit guarantee of RM2 million by Spacious Glory for the financial year ended Sept 30, 2017.

During the acquisition, Nexgram had said the purchase of 70% stake in Blue Hill was in line with its strategic plan to diversify into construction.

In November last year, Nexgram announced that Blue Hill was served with 10 writs of summons and statement of claims for a total sum of RM2.83 million.

The plaintiffs were claiming for the long outstanding debts in respect of the cause of action including non-payment of building/construction materials sold and delivered, non-payment for leasing of plastering machinery and breach of credit guarantee.

The writs dated as far back as Nov 1, 2016 but were not announced earlier because, individually, the writs of summons and statement of claims were below the materiality threshold of Nexgram, in respect of its obligation to make immediate disclosure.

In addition, Nexgram Land had on Aug 21, 2017 filed counter-claims against Spacious Glory, with claims that the writs clearly proved a fundamental breach on the part of Spacious Glory against the due diligence confirmation provided at the conclusion of the due diligence exercise conducted by Nexgram Land.

Nexgram said the disposal of the stake will not have any material impact on the issued share capital, net assets, earnings, gearing and substantial shareholdings of the group for the financial year ending July 31, 2018.