Scientex firms deal for 42.41% Daibochi stake for RM222.5m

KUALA LUMPUR (Dec 10): Scientex Bhd said it will issue 25.28 million new shares in the company to satisfy the proposed acquisition of a 42.41% stake in Daibochi Bhd.

Concurrently, Scientex, which is keen to extend a mandatory general offer (MGO) of the remaining stake in Daibochi after the acquisition, has yet to decide whether to acquire the remaining stake via cash or further issuance of new shares in Scientex.

In a filing today, Scientex said it has today inked a conditional share sale agreement (CSSA) with certain shareholders of Daibochi Bhd to acquire the stake via a share swap.

The announcement follows a Heads of Agreement (HoA) inked between Scientex and 14 shareholders of Daibochi which collectively owns 42.41% in the latter, as announced by Scientex on Nov 14.

The deal, worth RM222.5 million, will be completely conducted via a share swap, on the basis of 5.5 Daibochi shares for one Scientex share.

It effectively values Daibochi shares at RM1.60 apiece — pending any reduction from dividend or any distributions to current shareholders — and Scientex shares at RM8.80 apiece.

At RM1.60 a share, the proposed acquisition values Daibochi’s issued base of some 327.35 million shares at RM523.68 million.

Scientex’s offer of RM1.60 per Daibochi share is at a discount of 18.78% to its volume-weighted average market price (VWAMP) of RM1.97 per share for the five-day period ended Nov 13.

“For information purposes, the five-day VWAMP of the Scientex shares up to and including Dec 7, 2018, being the last transacted price of Scientex shares prior to this announcement, is RM9.26,” said the filing.

The purchase consideration, said Scientex, took into consideration Daibochi’s net asset of around 61 sen per share as at the end of its financial year ended Dec 31, 2017 (FY17), which represents a price-to-book value of 2.62 times.

Also taken into consideration is Daibochi’s FY17 earnings per share of 8 sen, which represents a price-to-earnings ratio (PER) of 20 times, compared with average PER of 17.79 times for companies in similar sector.

“The issuance of Scientex shares to satisfy the purchase consideration would result in interest savings for the company vis-à-vis a cash consideration funded by bank borrowings,” said Scientex.

“In addition, the share exchange offers the vendors an opportunity to participate in the future growth and prospects of Scientex,” it added.

Post-acquisition, Scientex will hold a 42.41% stake in Daibochi, representing 139.06 million shares.

In the meantime, Scientex’ share base will increase by 25.28 million or 5.17% from 488.93 million shares presently.

Moving on, Scientex also intends to extend an MGO for the remaining 57.59% stake — also at RM1.60 per share.

“The proposed MGO will be funded by a combination of internally-generated funds, bank borrowings and issuance of new Scientex shares,” it said.

On the rationale of the acquistion, Scientex said that globally, the industry in which the two companies operate in has seen several consolidation exercises between large international companies, towards achieving growth via acquisitions.

“Scientex is expected to obtain greater flexibility to grow Daibochi’s businesses organically with their expertise in the industry and inorganically which may include but are not limited to the injection of assets and/or businesses from Scientex,” it said.

In a separate statement, Scientex Bhd managing director Lim Peng Jin said, “The integration would allow the enlarged Scientex Group to offer a more comprehensive range of FPP solutions to support our clientele’s wide range of packaging requirements, thereby strengthening our capabilities and competitiveness.”

Scientex expects the proposal to be completed by the second quarter of 2019, pending shareholders’ approval on the proposed acqusition, the proposed MGO, as well as the proposed issuance of new shares to satisfy the deal.

Scientex shares lost 11 sen or 1.17% to close at RM9.32, giving it a market capitalisation of RM4.56 billion.

Daibochi shares rose one sen or 0.59% to RM1.70, giving it a market capitalisation of RM557.43 million.

Source: TheEdgeMarkets