This article first appeared in The Edge Malaysia Weekly on October 7, 2024 - October 13, 2024

In August, railway contractor Dhaya Maju Infrastructure (Asia) Sdn Bhd (DMIA) entered into a heads of agreement with Pestech International Bhd (KL:PESTECH) to take up no less than 51% of the latter at 0.155 sen per share.

Last week, the companies took another step forward in the corporate exercise. The price, however, is no longer 0.155 sen per share.

DMIA inked a conditional subscription agreement with Pestech to subscribe for new shares in the latter at 0.12 sen per share. It will fork out RM160 million for 57.5% of Pestech. The company is also seeking an exemption from undertaking a mandatory general offer for the rest of the shares in Pestech.

DMIA is the second party with which Pestech has entered into an agreement to subscribe for new shares. In July last year, IJM Corp Bhd (KL:IJM) was supposed to subscribe for new shares in Pestech, but the deal was aborted.

This time around, Pestech seems to have a better handle on things. It is seeking a 10% deposit, which comes to RM16 million.

Pestech will have to return the deposit, together with interest, if conditions precedent for the share issuance are not met. Among the conditions are approval from Bursa Malaysia for the listing of the new shares and approval from Pestech’s shareholders.

As for DMIA, it will lose the deposit if it walks away from the deal.

Obviously, Pestech was not going into another share subscription agreement without a financial commitment, hence the deposit of RM16 million from DMIA, pending the completion of the transaction. Compared with the previous deal with IJM, Pestech seems to have put itself in a better position in dealing with its potential new shareholder.

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