KUCHING: Sarawak Cable Bhd (Sarawak Cable) has proposed to acquire 100 per cent equity interests in Universal Cable (M) Bhd (Universal Cable) and Leader Cable Industry Bhd (Leader Cable) for RM210 million.
The company in a filing to Bursa Malaysia yesterday proposed to acquire all the remaining interests in both companies from HNG Capital Sdn Bhd (HNG Capital).
“The proposed acquisition of RM210 million will be settled through a combination of cash and the issuance of new ordinary shares of 50 sen each in Sarawak Cable,” the group said.
The principal activities of Universal Cable are the manufacture and sale of telecommunication and power cables while the principal activities of Leader Cable are the manufacture and sale of telecommunication cables, low and high voltage power cables for domestic and export markets.
Sarawak Cable and HNG Capital shall then enter into a share sale agreement (SSA) to formalise the proposed acquisition within 30 days upon the completion of the due diligence, it added.
The company shall pay HNG Capital an earnest deposit of RM2.1 million equivalent to one per cent of the purchase price on or before the expiry of the exclusive period.
The SSA shall be effective and unconditional on the date where the last of the conditions precedent are fulfilled. The earnest deposit shall be refunded free of interest if the conditions precedents cannot be fulfilled.
On another note, Sarawak Cable said the SSA shall stipulate that the payment of the balance of the purchase consideration of RM207.9 million (being the purchase consideration less the earnest deposit) shall be within 14 days from the effective date.
The SSA shall also stipulate that HNG Capital shall guarantee the total profit before taxation (PBT) of Universal Cable and Leader Cable for the financial year ending December 31, 2014 shall not be less than RM21 million.
HNG Capital shall pay Sarawak Cable of any shortfall in the guaranteed PBT within 90 days from the signing of the audited financial statement of the target companies for the financial year ending December 31, 2014.
If materialised, the proposed acquisitions of the target companies will be related party transactions.
In the meantime, Sarawak Cable noted the non-interested directors and audit committee of the company will deliberate on terms and conditions as well as the merits and risks of the proposed acquisitions.
Subsequently, an independent adviser will be appointed before the terms and conditions of the proposed acquisitions are finalised.
Shareholders of Sarawak Cable and potential investors are advised to exercise caution when dealing in Sarawak Cable shares, as there is no certainty that the proposed acquisitions may proceed or result in a binding agreement.
An announcement will be made upon the signing of the SSA between HNG Capital and Sarawak Cable in the near future, it said.