Thursday 28 Mar 2024
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KUALA LUMPUR (Feb 28): AWC Bhd is proposing to diversify its existing engineering services business to include rail-related works via the acquisition of a 60% stake in Trackwork & Supplies Sdn Bhd for RM43.5 million.

AWC said the proposed acquisition is expected to provide an additional source of revenue and profits to the group.

Trackwork’s principal activities include supplying of track materials and rolling stock, maintenance of railway tracks, supplying and commissioning of track tools, equipment and machinery as well as supplying of depot equipment and tools and track diagnostics and monitoring systems.

In a filing with Bursa Malaysia today, AWC said it has entered into a conditional share sale agreement with Goh Poey Hong, Chong Kim Loong, Goh Tse Woei, Kong Keat Voon, Chong Chong Hong, Lim Huey Yih and Shaun Chan Thiam Eng for the proposed stake acquisition.

Out of the RM43.5 million purchase consideration, RM20 million will be satisfied through cash and the rest through the issuance of new shares in AWC.

The deal comes with a net profit guarantee of RM20 million for the financial years ending Sept 30, 2018 and 2019 (FY18 and FY19). "As a pledge for the cumulative profit guarantee, such cumulative number of consideration shares worth RM12 million will be withheld," said AWC.

Additionally, Trackwork has a secured order book of RM120 million for the supply of track materials/machinery/fittings and a secured sales commission income of RM6.8 million from contracts secured by their international principals for FY18 and FY19.

AWC also signed a shareholders’ agreement with Trakniaga Sdn Bhd, which holds the remaining 40% stake in Trackwork, to govern the management and operation of Trackwork upon completion of the proposed acquisition.

A call/put option has also been put in place to ensure that Trakniaga does not dispose of its shareholdings in Trackwork to other parties and to minimise unnecessary disputes moving forward.

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