KUALA LUMPUR (Sept 19): Agricultural and industrial chemicals manufacturer Ancom Nylex Bhd (KL:ANCOMNY) is acquiring a 70% stake in Colorex Sdn Bhd for RM14 million, cash.
Established in 1996, Colorex is principally involved in the business of blending and trading of chemicals, colours and related products.
In a filing with Bursa Malaysia on Thursday, Ancom Nylex said its wholly-owned subsidiary Nylex Holdings Sdn Bhd has entered into a share sale agreement with Colorex's shareholders and directors Loke Teak Thong and Lim Tiak Cheong for the acquisition of 1.4 million shares in the company.
The proposed acquisition comes with a profit guarantee by Loke and Lim that Colorex shall achieve a profit after tax (PAT) of no less than RM2.5 million for two consecutive years.
"The vendors (Loke and Lim) further agree to compensate the purchaser (Nylex Holdings) for any shortfall in the profit guarantee, with such compensation to be adjusted proportionally based on the purchaser’s shareholdings in Colorex post completion," Ancom Nylex said.
According to its latest audited financial statements, Colorex posted a PAT of RM1.75 million for the financial year ended Dec 31, 2023 (FY2023), on revenue of RM42.96 million.
Its current assets stood at RM22.7 million, while its total borrowings were recorded at RM14.73 million.
In a separate statement, Ancom Nylex managing director and group chief executive officer Datuk Lee Cheun Wei said the proposed acquisition is synergistic and earnings-accretive to the group.
"Colorex’s range of products enhances our existing portfolio, specifically towards the automotive sector where our adhesives division [is] already serving. Thus, further expanding our specialty chemical offering. Moreover, we can leverage on each other’s strengths and expertise to broaden our market and geographical reach," he said.
According to Ancom Nylex, Colorex is one of the top three specialty chemical suppliers to the local automotive sector. It also serves other industries such as furniture, appliances and construction.
"On the other hand, this proposed acquisition also diversifies the earnings of the business within the chemicals segment. Simultaneously, this solidifies our position as a fully integrated chemical group in Southeast Asia," Lee added.
The proposed acquisition is expected to be completed within the next six months, upon which Colorex will be a 70% indirect subsidiary of Ancom Nylex.
Ancom Nylex’s annual net profit reached a new record high of RM81.47 million for the financial year ended May 31, 2024 (FY2024), although revenue for the financial year fell 2.3% to RM1.996 billion as compared to RM2.043 billion in FY2023.
Shares of Ancom Nylex gained one sen, or 0.96%, to close at RM1.05 on Thursday, valuing the company at RM1.06 billion.