KUALA LUMPUR (March 14): Prawn farming company MAG Holdings Bhd (KL:MAG) has proposed to buy farmland and other assets in Tawau, Sabah for RM39.6 million, in related party transactions.

The group's wholly owned subsidiary, North Cube Sdn Bhd, entered into a deal with Pegagau Aquaculture Sdn Bhd (PASB) to buy 111.5 acres of farmland for RM10 million, buildings and structure for RM15 million, as well as plant and machinery for RM7.6 million, according to MAG's bourse filing.

North Cube also signed an agreement to buy 57.24 acres of farmland from Lilian Chong Kah Nyuk for RM7 million, another filing showed.

MAG, which was previously known as Xinghe Holdings Bhd, said both deals are related-party transactions, as the group’s non-independent non-executive director Melvin Lim Chun Woei is connected to both sellers.

Chun Wei, who holds a nearly 2% stake in MAG, is the son of Chong and Lim Ah Cham, who is a major shareholder of PASB.

PASB is involved in the cultivation and marketing of aquaculture products, and building construction. It is also engaged in the processing, curing and preserving of fish, crustaceans and mollusks.

According to MAG, PASB has agreed to provide all necessary assistance to procure the necessary licences in connection with the farm operations, for two years after the sale.

The group said the acquisitions will be funded through a combination of bank borrowings and/or internally generated funds.

The acquisitions, it added, are expected to contribute positively to the group’s future earnings, and will enable the group to strengthen its market position, optimise resources, and achieve long-term growth by leveraging the additional land and facilities.

In 2019, MAG pivoted its business interest from edible oils to aquaculture, via the acquisition of two large prawn aquaculture farms in Tawau, Sabah.

MAG has a total of 384 cultivation ponds, a breeding capacity of 5,500 tonnes and a processing capacity of 8,000 tonnes annually, according to its annual report.

Shares of MAG closed unchanged at 17 sen, bringing the group a market capitalisation of RM323 million.

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