KUALA LUMPUR (Sept 18): TMK Chemical Bhd (KL:TMK) has agreed to acquire Chemical Company of Malaysia Bhd (CCM) from Batu Kawan Bhd (KL:BKAWAN) and its wholly-owned unit Enternal Edge Sdn Bhd for RM939.9 million.
TMK said the purchase will be satisfied through RM438.5 million cash and the issuance of 262.5 million new TMK shares to Batu Kawan at RM1.9098 apiece.
The new shares will see Batu Kawan acquire a 20.8% stake in TMK's enlarged share capital.
The cash portion will be funded partly by RM99.1 million raised in TMK’s initial public offering, with the remaining RM339.45 million to come from bank borrowings and/or internally generated funds.
TMK said the acquisition is part of its vertical integration, combining its chemical trading, storage and logistics operations with CCM’s manufacturing business.
CCM is Malaysia’s largest chlor-alkali producer and supplies chemicals used in industries including water treatment, rare earths, petrochemicals, electronics and rubber gloves.
Following the deal, CCM will become a wholly-owned subsidiary of TMK. The transaction is targeted for completion in the first quarter of 2027.
In a separate filing, Batu Kawan said it expects to record a pro forma gain of about RM598.16 million from the disposal.
Batu Kawan plans to use RM436.55 million of the proceeds to repay borrowings, which it estimated could save about RM18.34 million a year in financing costs.
The group said the disposal will allow it to focus on its oil palm plantation and property development businesses, while retaining exposure to the chemicals sector through its 20.8% stake in TMK.
Batu Kawan and persons acting in concert with it will collectively hold 57.4% of TMK after the transaction, from 46.2% currently.
As a result, Batu Kawan will seek an exemption from the Securities Commission Malaysia from having to make a mandatory takeover offer for the remaining TMK shares. The transaction will not proceed if the exemption is not obtained.
The deal is deemed a related-party transaction as Batu Kawan chairman Tan Sri Lee Oi Hian and managing director Datuk Lee Hau Hian are brothers of Datuk Lee Soon Hian and Lee Oi Loon, who are substantial shareholders of TMK with direct stakes of 39.5% and 6.5% respectively.
At 3pm on Friday shares of TMK were up four sen or 1.0% at RM3.13, valuing the group to RM3.13 billion while shares of Batu Kawan were up two sen or 0.1% at RM20.30, valuing the group to RM 8.11 billion.