KUALA LUMPUR (Aug 5): LEAP Market-listed Cloudaron Group Bhd (KL:CLOUD) has proposed the sale of its core software development and network connectivity services businesses to Abelco Investment Group AB for €7.8 million (RM38.45 million) in the Sweden-based financial services firm’s shares.

The company inked a share sales agreement with Nordic Growth Market-listed Abelco for the disposal of Cloudaron Pte Ltd (CPL) and DACS Network Solutions Sdn Bhd, according to its bourse filing on Tuesday.

The deal will see Cloudaron receive 17.94 billion shares in Abelco, equivalent to 88.68% of Abelco's enlarged share base, at an issue price of 0.5 Swedish krona (22 sen) apiece.

Cloudaron said it intends to distribute the Abelco shares to its shareholders and will undertake a capital reduction to raise its retained earnings to a position sufficient to facilitate the exercise.

Based on Cloudaron’s share base of 831.19 million shares, the distribution is expected to be on the basis of 21.58 Abelco shares for every one Cloudaron share.

The capital reduction exercise of RM50 million will reduce share capital from RM52.64 million to RM2.64 million and is projected to raise its retained earnings to RM39.94 million — sufficient to cover the RM38.45 million carrying amount of the Abelco shares.

“The proposed distribution will enable Cloudaron to reward the entitled shareholders for their continuous support by allowing them to directly participate in the potential future growth of Abelco, including any potential upside from the strategic integration of CPL and DACS into Abelco’s ecosystem and any future distributions declared by Abelco,” Cloudaron said.

The 88.68% stake in Abelco will oblige Cloudaron to undertake a mandatory takeover offer, but as it does not intend to hold the shares, it will accordingly submit an application to the Swedish Securities Council for an exemption.

The transaction is deemed a related-party transaction, given that Cloudaron chairman Datuk Gan Nyap Liou @ Gan Nyap Liow is also a director of Abelco.

Gan is a substantial shareholder of Cloudaron with a 7.02% stake via the vehicle PlanetBiz Investments Ltd, as well as a major shareholder of Abelco with a 25.22% stake via his directorship in Fatfish Group Ltd.

MainStreet Advisers Sdn Bhd has been appointed as the independent adviser to advise non-interested directors and non-interested shareholders.

Cloudaron notes the disposal is deemed a major disposal and the company will no longer have any units under it upon the deal's completion. “In this regard, Bursa Securities may suspend the trading of Cloudaron’s securities and delist the company.”

Nonetheless, the company said while it has not outlined any plans to acquire new businesses or assets, it will endeavour to identify potential targets and make appropriate announcements.

The disposals are expected to be completed by the fourth quarter of 2025, while the timeframe of the proposed distribution is unable to be determined at this juncture, according to Cloudaron.

In December 2023, Dataprep Holdings Bhd (KL:DATAPRP) proposed a 70% stake acquisition in DACS Network Solutions for RM10.5 million. However, the deal was called off in June last year after both sides mutually agreed to terminate a share sale agreement after further discussions.

Shares in Cloudaron ended 4.5 sen or 900% higher at five sen on Tuesday, valuing the company at RM4.16 million.