Favelle Favco to buy controlling stakes in four firms

PETALING JAYA: Favelle Favco Bhd is planning to acquire controlling stakes in four engineering firms with businesses in the oil and gas sector from a group of individuals for a total of RM87.4mil.

The combined adjusted profit after tax of the four companies in financial year ended Dec 31, 2016 (FY16) was RM15.6mil.

Under a heads of agreement with the vendors signed yesterday, Favco said all parties involved had agreed to negotiate exclusively for a period of at least three months, before a more concrete share sale agreement is signed.

The board believes this acquisition will enhance and widen the earnings base of the Favco group. Favelle Favco

Favco is seeking to acquire a 70% stake in all four companies. The proposed deal values the companies at eight times their combined historical earnings.

“The board believes that this proposed acquisition of the target companies will enhance and widen the earnings base of the Favco group,” it said in a filing with Bursa Malaysia.

“The Favco group’s international network will also provide synergies to the future business growth of the target companies,” it added.

The company said the final consideration price will be determined after a due diligence review of the target companies.

Any increase in the purchase price, it said, is payable in cash by the company over FY17 to FY19. This is assuming that the target companies achieve certain cumulative profit thresholds for the said three financial years.