KUALA LUMPUR (Sept 25): SAM Engineering & Equipment (M) Bhd is acquiring aircraft structure parts and precision engineering components manufacturer Aviatron (M) Sdn Bhd for US$43.4 million (approximately RM203.44 million) cash.

The acquisition of Aviatron — the manufacturer of nacelle beams for Boeing and Airbus — is a related party transaction (RPT) as SAM Engineering is buying the stake from its major shareholder Singapore Aerospace Manufacturing Pte Ltd (SAMPL), which controls 62.49% of SAM Engineering. A unit of Temasek Holdings Pte Ltd, SAMPL disposed of 48.71 million SAM Engineering shares or 8.99% in the listed company in January this year, paring its stake from 71.5%.

To fund the acquisition, SAM Engineering also proposed a renounceable one-for-four rights involving 135.397 million new shares at an indicative issue price of RM4.12, to raise RM557.84 million. Its counter closed at RM4.70 on Monday.

Funding for the Aviatron acquisition will take up 36.47% of the rights issue proceeds. SAM Engineering will then use RM200.5 million to repay advances from SAMPL (35.94%) and RM149.9 million to repay bank borrowings (26.87%), with RM4 million left to defray expenses relating to the proposals.

At end-June, SAM Engineering had cash and bank balances of RM30.16 million, against non-current borrowings of RM80.28 million and current borrowings of RM426.82 million.

Aviatron, according to SAM Engineering, is the sole contract manufacturer of nacelle beams for Airbus 220, Airbus 350 and Boeing 787 aircraft for its major customer — one of the world’s largest supplier of aerospace and defence products.

The acquisition is to capture Aviatron’s order book and in view of the expected recovery in the aerospace sector, SAM Engineering said, adding there are potential synergies to be had through the sharing of Aviatron’s manufacturing facilities.

SAM Engineering currently has two business segments, namely aircraft engine casings, nacelle beams and aero structure products manufacturing, and the provision of equipment engineering and solutions for semiconductor, hard disk drive and related industries.

The acquisition will raise its aerospace segment revenue in the financial year ended March 31, 2023 (FY2023) by 29.8% to RM430.72 million, it added.

“The SAM Engineering Group’s management team is also currently providing corporate management and administrative services to Aviatron, while Aviatron’s management team is currently providing day-to-day manufacturing support on nacelle beams to the group.

“In view that Aviatron is already using certain business support functions provided by the SAM Engineering Group, the proposed acquisition will facilitate the consolidation of these business support functions, merging of material and quality management systems, as well as eliminate related party transactions between Aviatron and the group which includes the rental of factory and provision of management services,” it said.

SAM Engineering expects the exercises to be completed by 1Q2024, pending necessary approvals including from non-interested shareholders at an extraordinary general meeting to be held later.

At RM4.70, SAM Engineering has a market capitalisation of RM2.55 billion. Year to date, the counter has retreated 24 sen or 4.86%.