KUALA LUMPUR (April 24): Chuan Huat Resources Bhd (KL:CHUAN) is exiting its loss-making subsidiary Pineapple Resources Bhd (KL:PINEAPP) by disposing of its entire 63.86% stake comprising 30.97 million shares for RM26.02 million cash. The steel trader and manufacturer is looking to focus on its core businesses and unlock value from a non-core investment.

In a Bursa Malaysia filing on Friday, Chuan Huat said its wholly owned unit Chuan Huat Holdings Sdn Bhd had entered into two separate share sale agreements with Gan Kok Xan and Yeoh Guan Fook to dispose of the shares at 84 sen apiece.

Gan is a substantial shareholder of Mega Fortris Bhd (KL:MEGAFB) through his 35.86% stake in ProWealth Management Holding Ltd, where he is also a director. ProWealth became a major shareholder of Mega Fortris after acquiring a 25.99% stake in Mega Fortris Global Pte Ltd, which owns 65% of the company.

Yeoh is a director of Foong Yen Capital Sdn Bhd, a company involved in money lending, trading basic goods, and investing in securities.

Gan will acquire 17.39 million shares, or a 35.86% stake in Pineapple Resources, for RM14.61 million, while Yeoh will buy 13.58 million shares, or a 28% stake, for RM11.41 million.

As their combined shareholding in Pineapple Resources will rise from nil to 63.86%, Gan will be required to undertake a mandatory general offer (MGO) for the remaining shares not already owned by him and persons acting in concert, at 84 sen apiece.

According to the filing, Gan, who is launching the MGO, plans to maintain Pineapple Resources’ listing status on the ACE Market of Bursa Malaysia. Yeoh is deemed a person acting in concert with Gan.

Upon completion, Pineapple Resources, whose subsidiaries are involved in the retailing of computers and related accessories, restaurant operations, distribution of food and beverage ingredients, and restaurant franchising, will cease to be an indirect subsidiary of Chuan Huat.

Chuan Huat said the disposal forms part of an ongoing strategic review to enhance operational focus on its steel and building materials trading, steel processing and manufacturing, as well as property investment businesses.

“This will allow the group to operate more efficiently on its existing business and/or explore new viable investment opportunities as and when they arise,” it said.

The company added that Pineapple Resources had been loss-making for the past seven years, and the disposal would allow the group to deconsolidate the business and refocus its resources on its core businesses.

Chuan Huat said the deal also presents an opportunity to realise and unlock its investment in Pineapple Resources’ information technology retail and food and beverage operations, as it expects to book an estimated net gain on disposal of about RM18 million upon completion.

Net proceeds will be utilised for working capital and repayment of bank borrowings within 12 months of completion.

Chuan Huat shares closed unchanged at 21 sen on Friday, with a market capitalisation of RM35.42 million. Pineapple Resources shares ended the day unchanged at 81.5 sen, with a market value of RM39.53 million.