KUALA LUMPUR (Aug 15): IJM Corp Bhd’s (KL:IJM) proposed acquisition of a 44.83% stake in Pestech International Bhd (KL:PESTECH) in a RM124 million cash deal, or 15.5 sen per share, has fallen through.
In a bourse filing on Thursday, Pestech announced that the subscription agreement, which would have made IJM its largest shareholder, has been mutually terminated due to non-fulfillment of the conditions precedent outlined in the agreement.
"In light of this, the board has decided to abort the proposals," said Pestech.
However, Pestech noted that the termination of the agreement does not affect the existing joint venture with IJM Construction Sdn Bhd for the automated people mover project at Kuala Lumpur International Airport (KLIA).
The contract value for the aerotrain project involving the IJMC-Pestech JV stands at RM175.65 million, with IJMC holding a 60% interest and Pestech the remaining 40%.
Termination of the share purchase plan would mean a return to the drawing board for Pestech’s recapitalisation exercise.
"The board of directors is exploring alternative fund-raising proposals to meet its funding requirements, with details to be announced in due course," said Pestech, which is facing financial stress.
At the time of writing, IJM has not made any announcement on the termination of the acquisition that was mooted in July last year.
To recap, on July 24 last year, IJM signed an agreement to acquire a 44.83% stake in Pestech for RM124 million through a restricted issue, subscribing to 800 million shares at 15.5 sen per share to enhance its presence in the railway construction segment.
In the following month, Malaysia Airports Holdings Bhd (KL:AIRPORT) (MAHB) terminated Pestech’s RM742.9 million aerotrain replacement contract at KLIA 1.
Subsequently, in January this year, an IJM-led consortium including IJMC, Pestech Technology Sdn Bhd and ALSTOM Transport Systems (Malaysia) Sdn Bhd, was appointed by MAHB to complete the RM456.1 million aerotrain replacement project.
Cash-strapped Pestech, which has been in the red for eight consecutive quarters, reported a net loss of RM25.8 million for the second quarter ended March 31, 2024 (2QFY2024) due to lower revenue and high finance costs.
The group's revenue came in at RM72.4 million, primarily from its substation and transmission division. No comparative figures are available, as the group changed its financial year-end from June 30 to Sept 30.
As of end-March, the group held cash and bank balances of RM62.5 million.
Shares in Pestech closed 4.5 sen or 20.93% lower to 17 sen on Thursday, giving it a market capitalisation of RM164.84 million. The counter is down 47% this year.
IJM shares fell five sen or 1.55% to RM3.18, giving it a market capitalisation of RM11.6 billion. The counter has gained 69% this year.