KUALA LUMPUR (Oct 22): Contract manufacturer Ge-Shen Corp Bhd (KL:GESHEN), whose share price has jumped over 200% year-to-date, has obtained shareholders’ approval to buy a 40% stake in electronic manufacturing services (EMS) firm Local Assembly Sdn Bhd for RM48 million, cash, and diversify its existing business to include EMS.
At Tuesday's extraordinary general meeting (EGM), Ge-Shen’s shareholders voted 100% in favour of the acquisition deal and proposed diversification, the company’s filing showed.
Its shareholders also voted in favour of a private placement involving 39.60 million shares to raise gross proceeds of up to RM91.20 million to fund the acquisition, borrowings as well as working capital.
The group said that the acquisition in Local Assembly comes with a guaranteed minimum profit-after-tax of RM24 million from Local Assembly for the financial years ended 2024 (FY2024) and 2025 (FY2025).
Meanwhile, Ge-Shen will introduce EMS into its existing manufacturing solutions, which include plastic injection moulding, precision engineering, and design and prototype.
Ge-Shen chief executive officer Adrian Foong Hong Nian said that the diversification into EMS will strengthen the company’s core manufacturing business and capitalise on future growth opportunities in this sector.
“The acquisition of Local Assembly will not only diversify our customer base, but also allow us to cross-sell our other manufacturing services, positioning us as a one-stop manufacturing service provider in the industry,” Foong said.
He noted that the company is now ready to execute its diversification strategy efficiently, focusing on sustainable growth and value creation to meet customers’ and markets’ demand.
Shares in Ge-Shen hit above RM3 when it first announced in March plans to acquire the 40% stake in Local Assembly from co-founders Chai Voon Sun, Gurmakh Singh Ajmer Singh and Wee Thian Song.
Chai owns a 37.5% stake in Local Assembly, while Gurmakh holds 22.5% and Wee owns 15%. Meanwhile, Chin Hin Group Bhd (KL:CHGP) executive chairman Datuk Seri Chiau Beng Teik's 55%-owned Divine Inventions owns 20% while Proven Venture Sdn Bhd holds the remaining 5%.
Less than two months after the deal, shares of Ge-Shen hit a new high of RM4.47, following the emergence of Chin Hin Group’s Chiau family as its second largest shareholder.
It is worth noting that egg producer LTKM Bhd (KL:LTKM) had in April 2022 proposed a reverse takeover deal worth RM336 million of Local Assembly — which would have seen LTKM sell its chicken egg production business to become an EMS provider.
However, in October last year, the deal was mutually terminated, with LTKM citing the parties' contrasting business performance.
Ge-Shen closed unchanged at RM3.65 on Tuesday, giving it a market capitalisation of RM468.75 million.