KUALA LUMPUR (May 6): Inari Amertron Bhd appears to be eyeing a mega acquisition that will cost over RM1 billion.

The company announced to Bursa Malaysia that it wants to raise up to RM1.07 billion via a private share placement to be used for capital expenditure, acquisitions and investments.

The enormous amount of fresh capital to be raised is likely the biggest ever among the local semiconductor-related firms taking advantage of the current share price rally.

The most recent sizable share placement was done by Unisem (M) Bhd, which raised RM283.98 million last year.

Inari’s fund raising exercise has prompted many to wonder why the outsourced semiconductor assembly and test (OSAT) company needs that much money, considering its net cash pile of about RM750 million, which is likely to balloon amid the anticipated strong earnings growth ahead.

In a bourse filing, it said it is in continuous discussions with potential new customers within the semiconductor industry to provide OSAT services. And as part of the negotiation process, the group may be required to commit to substantial investments in factory fit-outs, and to acquire and install new manufacturing equipment and additional production space to secure new customers and or long-term supply orders.

As such, Inari Amertron said it is critical that it secures the required funds, so that it may expeditiously carry out any capacity expansion plans while putting it in a better position when negotiating with potential customers.

It added that it will be using the raised funds to accelerate plans to acquire and invest in “good value, high quality and complementary semiconductor and OSAT related companies and assets” that can generate sustainable revenue and earnings growth, good profit margins and good returns on invested capital.

“Once the investments have been identified and the relevant agreements have been entered into, immediate announcements will be made. In addition, shareholders’ approval shall be sought at an extraordinary general meeting to be convened, if required,” it said.

Given the bullish market sentiment, some quarters asked why didn't Inari make a cash call instead to avoid the dilution effect on existing shareholders?

Based on its issued share capital of 3.34 billion shares, it could price a rights issue at about 32 sen per share on a back-of-envelope calculation, to raise the sum required. Inari’s share price closed at RM3.26 on Thursday.

Under its proposed placement, Inari will issue up to 333 million new shares — which accounts for 10% of its share capital — to third party investors at an indicative price of RM3.20 a share.

The placement is expected to be completed in the second half of 2021, the group said, adding that its share capital will rise to 3.77 billion shares after the placement and the full exercise of the group's employee share option scheme.

Inari is due to release its financial results for the third quarter ended March 31, 2021 this month, and analysts are expecting a good set of numbers from the company.