KUALA LUMPUR: The MCA-controlled plantation firm, Matang Holdings Bhd, has launched a reverse takeover (RTO) of electronics firm Scope Industries Bhd in a deal worth RM145 million.
The same deal also saw ACE Market-listed Scope signing an agreement to buy out another plantation company, Benua Mutiara Sdn Bhd, for RM31.7 million. Both deals are to be satisfied via the issuance of new Scope shares at 25 sen each.
The proposals, if approved, will change Scope’s nature of operations from being a manufacturing company to a plantation outfit with a total landbank of 6,966 acres.
According to filings with Bursa Malaysia yesterday, Scope and Matang have signed a conditional business merger agreement to transfer Matang’s entire assets and liabilities to Scope for RM145 million via the issuance of 580 million shares in Scope at an issue price of 25 sen.
After the completion of the two deals, Matang will hold a 53.1% stake in Scope. Matang’s former chairman, managing director and chief financial officer would be appointed to the board of Scope.
Scope’s name would also be changed to one that contains the word “Matang”.
Scope said the proposed deals will allow it to expand its oil palm plantation business. “Scope’s total plantation landbank size will increase from the existing 3,496 acres to approximately 6,966 acres (including 2,677 acres held by Matang and 793 acres held by Benua),” it said.
Scope added that the deals would improve its profitability via higher revenue and cost saving measures, such as the sharing of common resources and procurement of equipment.
“The proposed merger also enables Scope to leverage on Matang’s knowledge and experience in managing oil palm plantations as Matang has been in the business for over 25 years,” it said.
According to the Bursa filing, Huaren Holdings is the biggest substantial shareholder in Matang with a 10.72% stake. Huaren, in turn, is wholly owned by the MCA.
The directors of Matang include Datuk Seri Tan Chai Ho, Haw Chin Teck, Ngoh Heng Kong, Tan Hong Hua, Tay Puay Chuan, Wong You Fong, and Nyam Mei Ting.
Matang’s net profit after tax for the financial year ended June 30 was RM5.2 million. The merger consideration of RM145 million was arrived at on a willing buyer willing seller basis after considering Matang’s net asset value of RM142.6 million, said the filing.
Scope is also proposing that a four-year moratorium be imposed on the 580,000 new Scope shares to be issued to Matang. Matang would only be able to trade the Scope shares once the moratorium is lifted over four stages.
Scope is proposing to issue 118 million new shares at 25 sen per share to acquire Benua for RM29.5 million. The price consideration was arrived at after subtracting the amount due from Benua vendors and related parties.
Incorporated in 1990, Benua posted profit after tax of RM1.7 million for the fiscal year ended Sept 30, 2011 (FY11) while net assets stood at RM5.1 million.
Benua directors include Chew Kong Yoon, Han Siew King, and Khoo Kay Thye. Its shareholders are Chew, Han, Khoo, Han Kim Leng, Mah Chou Yoke, Agriculturists Inc Sdn Bhd, and Agriculturists Inc Development Sdn Bhd.
Both deals need to get approval from Scope and Matang’s shareholders before they are finalised. Barring any unforeseen circumstances, the proposals are expected to be completed by the first half of 2013.
In the last six months, Scope rose 114% to an all-time high of 45 sen on Aug 6 but closed slightly lower yesterday at 44.5 sen. According to its annual report, Scope’s major shareholders are Wah Len Enterprise Sdn Bhd with a 16.75% stake, managing director Lim Chiow Hoo (13.85%) and executive director Lee Min Huat (11.11%).
For FY12 ended June 30, Scope’s net profit fell to RM589,000 from RM5.2 million a year earlier due to the disruption of the supply chain caused by the Thai floods and the Japanese tsunami. Revenue fell 14% to RM18.4 million from RM21.4 million.
This article first appeared in The Edge Financial Daily, on Nov 20, 2012.