KUALA LUMPUR (Oct 5): LTKM Bhd has scrapped the reverse takeover deal, which includes the planned RM336 million acquisition of an entire stake in electronics manufacturing services (EMS) player Local Assembly Sdn Bhd.
The reverse takeover deal was first proposed in April 2022, which would have seen the company sell its existing chicken egg production business to become an EMS provider. The deal also involved a corporate revamp with the emergence of new controlling shareholders in LTKM and change of its name to LA Technology Bhd.
In a bourse filing on Thursday, LTKM said the group and vendors had mutually terminated the proposed acquisition given that both parties have experienced contrasting financial performance subsequent to the execution of the latest supplemental letter agreement dated May 10, 2023.
“Although its projects are still ongoing, Local Assembly is facing unforeseen delays in their implementation by its major customers, while LTKM has returned to profitability from the egg subsidy by the government since the inception of the proposals. As such, both parties concluded that it is mutually beneficial to terminate the proposed acquisition and to respectively pursue any future strategies of their own,” LTKM explained.
As the proposed acquisition is inter-conditional with the other components of the proposals, they are therefore concurrently aborted. As such, LTKM and Ladang Ternakan Kelang Sdn Bhd (LTKSB) also entered into termination letter agreements to mutually record the termination of the proposed disposals of the egg production business for cash disposal consideration of RM222 million.
LTKSB is a holding company of LTKM, holding 96.4 million LTKM shares, representing a 67.4% equity interest.
Other than professional fees incurred for the proposals, LTKM said the termination of the proposals is not expected to have a material adverse impact.
To recap, the reverse takeover deal would have seen LTKM acquiring a 100% stake in Local Assembly for RM336 million, to be satisfied by a combination of RM100 million in cash and the issuance of 181.54 million new LTKM shares at an issue price of RM1.30 each.
The vendors of Local Assembly are Chai Voon Sun, Gurmakh Singh A/L Ajmer Singh, Wee Thian Song, Divine Inventions Sdn Bhd and Proven Venture Sdn Bhd.
Notably, one of Local Assembly's indirect shareholders is Chin Hin Group Bhd chairman Datuk Seri Chiau Beng Teik, who is deemed interested by virtue of Divine Inventions Sdn Bhd's 20% stake in the company. Divine Inventions is a wholly-owned subsidiary of PP CH Realty, in which Chiau has a 55% stake.
LTKM said it would also seek an exemption for Local Assembly's shareholders to mandatorily make a takeover offer for its remaining shares that they do not already own after the deal is concluded.
In addition, the company also sought to undertake a restricted issue of 63.27 million new LTKM shares, representing 20% of the enlarged share capital of LTKM, to investors who would be identified later.
Once the share sale and restricted issue were concluded, Chiau, along the other Local Assembly share vendors, would become major shareholders of LTKM with a combined 57.4% stake, while Local Assembly itself would become a wholly-owned subsidiary of the listed entity.
Part of the exercise would have also included LTKM’s proposal to undertake a proposed special dividend-cum-capital repayment of 90 sen per share on an entitlement date to be determined and announced at a later date, and consolidate two existing LTKM shares into one LTKM share after the proposed special dividend- cum-capital repayment.
LTKM posted an annual net profit of RM20.63 million for the financial year ended March 31, 2023 (FY2023), reversing its loss-making positions from an annual net loss of RM27.39 million in FY2021 and RM16.1 million in FY2022, its annual report showed.
Annual revenue also improved to RM257.27 million in FY2023, compared with RM201.67 million in FY2022 and RM137.4 million in FY2021.
The better performance in FY2023 was due to better contribution from its poultry segment amid government subsidies and a higher margin of export sales.
Datuk Tan Kok is a controlling shareholder of LTKM, holding an indirect stake of 70.61% via LTKSB and a direct stake of 2.42%.
LTKM’ shares price settled up one sen or 0.69% at RM1.45, bringing the group a market capitalisation of RM208 million.
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