KUALA LUMPUR (Sept 18): Cape EMS Bhd is buying US-based electronic manufacturing services (EMS) player iConn Inc for US$16.5 million (RM76.6 million) in a bid to strengthen the group’s offerings and presence in the world's largest economy.

To fund the acquisition, Cape EMS — whose IPO in March raised RM155.7 million — plans to undertake a private placement equivalent to 10% of its share base, the group said in a stock exchange filing on Monday.

The placement, it said, will raise an estimated RM106.15 million based on an indicative placement price of RM1.15, which represents a 4.5% discount to the group's five-day volume weighted average market price up to Aug 25.

Cape EMS’ shares last traded at RM1.14 on Monday, down five sen or 4.2%, valuing the group at RM1.05 billion. While the current price is above the IPO price of 90 sen, it is 24% shy of the counter’s highest level of RM1.50 reached on April 19.

Cape EMS updated that there remains RM133.15 million from its IPO proceeds that has yet to be utilised. This money is slated to be invested into other expansion use, like construction of new warehouse and automated storage facilities, setting-up of new cleanroom facility and purchase of new automated production lines for EMS operations, installation of energy saving cooling system, and purchase of new machinery and equipment for die cast manufacturing related services.

The group said its acquisition of the EMS player comes with a guarantee of US$8 million aggregate profit after tax between 2024 and 2026.

iConn, which is involved in the provision of virtual manufacturing — comprising, among others, designs for manufacturing, engineering and sourcing specialists — is currently 44.6% owned by Hidirlar Family Trust, 36.9% by Rabia Hidirlar Investment Trust and 18.5% by Low Kim Teck Henry.

“iConn’s services are complementary to the Cape EMS Group’s EMS operations, as the Cape EMS group currently relies on its customers for the provision of electronic schematic, assembly drawings, wire lists and test specifications for its box build assembly operations.

“With the integration of iConn’s design and engineering capabilities into the Cape EMS Group’s EMS process, the Cape EMS Group would be able to expand its range of services under its EMS segment, thereby improving its appeal to existing and potential customers,” the group said.

It added that iConn being situated in the US has a geographical advantage in supporting Cape EMS’ operations in that country. The US is Cape EMS' biggest export market for the financial year ended Dec 31, 2022, growing by 47.8% compared to the preceding financial year.

Cape EMS disclosed that it provides EMS to iConn for technology-based access points and mechanical apparatus for life science and advanced medical equipment. iConn, meanwhile, is Cape EMS’ supplier for electrical interconnect components that it uses for its other customers.

Cape EMS has appointed Hong Leong Investment Bank Bhd as the principal adviser for the acquisition and as the placement agent for the private placement.

Shares of Cape EMS fell five sen or 4.2% to close at RM1.14, giving it a market capitalisation of RM1.05 billion.