KUALA LUMPUR (Dec 27): SCGM Bhd's (KL:SCGM) substantial shareholders are to inject their agriculture-related business into the cash company in return for RM207.94 million worth of shares as part of the company's regularisation plan.
SCGM entered into a conditional share sale agreement with several vendors to acquire the entire equity interest in Eramas Global Group Sdn Bhd for the issuance of 569.7 million SCGM shares at an issue price of 36.5 sen, according to the company's bourse filing on Friday.
Meanwhile, prior to the acquisition of Eramas, SCGM intends to distribute RM48.14 million, cash, in the form of a 25 sen per share special dividend to its shareholders.
The vendors comprise Chin Kok Tian, Yan Hua Lan, Tan Ah Tek, Gan Chuan Lee, Tey Chee Shin, Tan Tai Chong and Lau Sie Khian. The deal is deemed a related-party transaction as Chin and Yan collectively control a 16.13% stake in SCGM.
Attached to the deal are the vendors’ guarantee for Eramas to achieve a consolidated profit after tax (PAT) of RM18 million for the financial year ending Dec 31, 2025 (FY2025). According to SCGM, Eramas posted a profit after tax of RM12.69 million in the financial year ended Dec 31, 2023 (FY2023), RM3.94 million in FY2022, RM5.75 million in FY2021 and RM7.33 million in FY2020.
SCGM noted that its cash balance stood at RM116.91 million as at end-November, most of which came from the disposal of its core business Lee Soon Seng Plastics Industries Sdn Bhd (LSSPI) back in 2022 to Mitsui.
“The proposed special dividend is intended to reward SCGM’s existing shareholders for their continuous support towards SCGM and its subsidiaries by returning cash of the group after taking into consideration the intended earmarked for financial requirements,” it added.
On the remaining RM68.77 million of its untouched cash balance, SCGM said it plans to utilise this cash to expand Eramas’ manufacturing facility and fund working capital. It noted that this would only occur post-completion of its regularisation plan.
Post-Eramas acquisition, the vendors will offer up to 95.3 million shares — 12.5% of enlarged share base — to Bumiputera investors at an offer price of 35 sen apiece. Upon the acquisition and offer for sale's completion, Chin and Yan’s stake in SCGM will stand at 51.84%.
SCGM noted that its executive chairman Lee Hock Seng, who owns a 5.2% stake in the company, will be redesignated as non-executive deputy chairman upon completion of the company’s regularisation plan. Lee was one of the founders of LSSPI.
In his stead, Chin will sit at the helm of the board as non-executive chairman. This will be accompanied by various other changes to the board.
As the vendors will collectively hold over 33% of SCGM’s shares, the company will apply to the Securities Commission Malaysia for an exemption on requiring them to extend a mandatory offer.
BDO Capital Consultants Sdn Bhd has been appointed as an independent adviser to advise non-interest directors and shareholders.
Shares in SCGM ended half a sen or 0.72% lower at 69 sen on Friday, valuing the company at RM132.62 million.