This article first appeared in The Edge Financial Daily on September 28, 2018

KUALA LUMPUR: AWC Bhd, which recently secured approval from shareholders to purchase a 60% stake in Trackwork & Supplies Sdn Bhd (TWS), has proposed to issue up to 61.63 million free warrants on the basis of one warrant for every five existing shares held.

The proposed issuance has taken into consideration the new AWC shares to be issued in tranches as part settlement for its proposed acquisition of the stake in TWS, the group said in a stock exchange filing yesterday.

The entitlement date will be determined by the board later, AWC added.

The warrants will be issued at no cost to entitled shareholders and are intended to reward shareholders for their support, as well as strengthen the group’s capital base, AWC said.

Based on an illustrative exercise price of 77 sen per warrant, AWC could raise up to RM47.45 million from the issuance, which will be used for future working capital requirements.

It expects the proposed issuance to be completed by the fourth quarter of this year.

“The gross proceeds to be raised may also be utilised to part finance the option price in the event that the proposed call or put options [for AWC to acquire the remaining 40% in TWS] are exercised,” it said.

Based on a shareholders’ agreement in February 2018 with Trakniaga Sdn Bhd, the remaining 40% shareholder of TWS, Trakniaga, has a call option to dispose of its entire stake within five years of the completion of the acquisition. AWC, in turn, has a put option to acquire Trakniaga’s stake following that date.

Shares in AWC closed up 5.5 sen or 6.47% yesterday at 90.5 sen, giving the group a market capitalisation of RM247 million.