KUALA LUMPUR (Aug 18): Ideal Jacobs Malaysia Corp Bhd has proposed to acquire Widad Business Group Sdn Bhd for RM520 million in cash and shares, marking its maiden foray into the construction and integrated facilities management (IFM).
At the same time, Ideal Jacobs,, which owns industrial printing factories in China, is also planning to dispose its manufacturing, fabrication and trading businesses to Oriental Dragon Incorporation Ltd, a Hong Kong incorporated firm, for RM28 million. This, it said, is part of its plan to realign its core business.
Ideal Jacobs said the two proposals, which entails the acquisition of a new business and the disposal of existing business, were formalised after it inked conditional sales and purchase agreements with Widad Business Group and Oriental Dragon today.
“Upon completion of the proposed acquisition and proposed disposal, Ideal Jacobs and its subsidiaries will no longer be involved in manufacturing, fabrication and trading businesses, and will instead be principally involved in IFM and construction activities,” Ideal Jacobs said in a filing with Bursa Malaysia today.
As for the proposed acquisition, Ideal Jacobs said it will pay RM520 million to the shareholder, Widad Business Group. Of this, the China-based firm said it will pay RM110 million in cash, while the remaining RM410 million will be satisfied by issuing 1.78 billion new shares at 23 sen per share, which are pegged at a price-earnings ratio of 14.1 times and price-to-book ratio of eight times.
Ideal Jacobs added that the new shares to be issued were arrived at a “willing-buyer willing-seller” basis, after taking into account various factors such as outstanding orderbook, tender book, long-term outlook, and consolidated net assets.
The proposed acquisition, it added, will result in Widad Business Group — and indirectly its shareholders, Tan Sri Muhammad Ikmal Opat Abdullah who holds a 95% stake, and his wife Puan Sri Jamilah Mahamad Isa who owns the remaining 5% interest — to emerge as a new controlling shareholder.
This, it noted, could trigger a mandatory general (MGO) offer as Widad Business Group — together with Muhammad Ikmal and Jamilah — will see their collective holdings in Ideal Jacobs soar to more than 33% from 0.54% currently.
“A notice of the MGO will be served to the board (of Ideal Jacobs) immediately upon the acquisition sales and purchase agreement becoming unconditional,” the firm added, noting that the take-over will be done at a minimum offer price of 23 sen per share.
As for the proposed disposal, Ideal Jacobs said it entails the sale of its two subsidiaries — Ideal Jacobs (HK) Corpo Ltd and Ideal Jacobs (Xiamen) Corp — for RM28 million, valued at a price-earnings ratio of 17.6 times and a price-to-book ratio of one time.
“The board does not intend to seek alternative bids from other parties for the proposed disposal (of its existing business to Oriental Dragon,” Ideal Jacobs added.
In conjunction with the two earlier proposals, Ideal Jacobs said it has also proposed to raise a minimum of RM122.7 million via a private placement exercise, which will be implemented via the issuance of up to 534.03 million new shares at a minimum price of 23 sen apiece.
Ideal Jacobs added that proceeds to be raised from the private placement exercise will be used to partly finance the acquisition of Widad Business Group, while meeting minimum working capital requirements.
To sweeten the earlier corporate proposals, Ideal Jacobs is rewarding its shareholders with free warrants that will be issued on the basis of one warrant for every five existing shares.
“The Proposed Free Warrants will be implemented in a single issuance. The Board will, in its absolute discretion, deal with any fractional entitlements of warrants as it deems fit or in the best interests of the company,” it added.
On prospects, Ideal Jacobs said Widad Business Group has – year-to-date — secured IFM-related contracts and conducted upgrading works on sewage treatment plants and pipe installation works, worth a total RM1.3 billion.
“These contracts are in various stages of completion and will be completed over the next few years, providing Ideal Jacobs with contracted revenue of approximately RM1.3 billion up to 2022,” it said.
In addition, Ideal Jacobs noted that Widad Business Group via its subsidiary has submitted IFM and construction bids totalling RM2.1 billion, which, “if secured, will further enhance its order book and earnings potential.”
To complete the corporate proposals, Ideal Jacobs said it will seek necessary approvals from Bursa Malaysia, its shareholders and any other relevant regulatory agencies.
To assess the reasonableness and fairness of the proposals, Ideal Jacobs said it has appointed Mercury Securities Sdn Bhd as its independent adviser.
Ideal Jacobs expects to complete the proposal, advised by Kenanga Investment Bank Bhd, by the first quarter of 2018.
Shares in ACE-listed Ideal Jacobs dropped one sen or 2.13% to close at 46 sen today, for a market capitalisation of RM62.42 million.