KUALA LUMPUR (Dec 29): Powerwell Holdings Bhd (KL:PWRWELL) is acquiring 49% stakes in a Kuching-based switchboard maker and seller for RM16.66 million cash to grow in East Malaysia.

Powerwell, an electricity distribution products maker, inked conditional shares sales and purchase agreements with four shareholders in Tenaga Kenari Sdn Bhd (TKSB) and Tenaga Kenari Marketing Sdn Bhd (TKMSB) to acquire the 49% stakes in both companies, according to a bourse filing on Monday.

The stake acquisitions are in line with the group’s long-term strategy to strengthen its earnings base and market positioning by establishing a more direct and localised presence in East Malaysia, it noted.

Attached to the stake acquisition deals is a profit guarantee for TKSB and TKMSB to achieve a cumulative profit after tax of RM12 million over three consecutive 12-month financial periods ending March 2026, 2027 and 2028.

For the financial year ended Sept 30, 2024 (FY2024), TKSB posted a net profit of RM1.35 million on a revenue of RM31.55 million, while TKMSB saw a net profit of RM754,000 on revenue of RM8.89 million.

Also attached to the shareholders’ agreements were call options granted to Powerwell to acquire an additional 2% stake in TKSB and TKMSB from the vendors for RM1.58 million cash.

“Having a strong manufacturing and distribution footprint as well as a long-standing customer base in the power distribution segment, TKSB and TKMSB serve to provide a solid platform for Powerwell to participate in the ongoing growth of the East Malaysian market,” it said.

The selling shareholders include Ling Soon Kiong, Tian Nyan Fatt, Ting Ing Houng, and Lee Joon Kion.

Post-stake acquisition, Powerwell will become the largest shareholder in both TKSB and TKMSB, while Ling’s stake will fall to 5.53%, Tian’s to 4.98%, Ting’s to 2.95% and Lee’s to 2.52%. Other shareholders in the companies include Lau Kiew Yung (23.02%) and Ling Tuk Ling (12%).

A 15.98% stake each in TKSB and TKMSB have been pledged as security for the profit guarantee performance. The pledged stake comprises the remaining stakes of the four selling shareholders — Ling, Tian, Ting and Lee.

“In the event of any shortfall in meeting the profit guarantee, [Powerwell] shall be entitled to receive such number of security shares as are equivalent to the amount of the shortfall, with any remaining deficit to be settled in cash by the vendors in accordance with the terms of the shares sale and purchase agreements and/or the shareholders agreements,” the group said.

Powerwell also inked shareholders' agreements with TKSB and TKMSB and their shareholders to set out mutually agreed rights, duties, liabilities and obligations in relation to the management and operations of the companies.

The stake deals are expected to be completed by end-March 2026, Powerwell noted.

Shares in Powerwell ended half a sen or 0.78% lower at 63.5 sen, valuing the company at RM368.65 million.