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THE corporate exercise between Hume Industries Bhd (formerly known as Narra Industries Bhd) and Hong Leong Industries Bhd (HLI), which was completed in October, has unlocked significant values for both companies.

In essence, under the exercise, Hume Industries acquired building material companies Hume Concrete Marketing Sdn Bhd and Hume Cement Sdn Bhd from HLI as well as HLI’s parent, Hong Leong Manufacturing Group Sdn Bhd (HLMG), for a total of RM448 million.

The purchase was satisfied by the issuance of 448 million new shares in Hume Industries at RM1 each (100 million shares were issued to HLMG while 348 million shares were issued to HLI).

With a strong set of new businesses, Hume Industries saw a boost from the exercise, which also positioned the company as the new building material division of the Hong Leong Group.

Hume Industries’ share price increased from an average of 22 sen for the 12 months up to Sept 10, 2013 (being the last market day prior to the announcement of the acquisitions) to close at RM1 on Sept 12, 2013 (being the market day immediately after the announcement of the acquisitions). This raised its market capitalisation from RM13.7 million to RM62.2 million.

Hume Industries’ shares continued to surge to close at RM4.65 on the ex-date of Aug 12 after adjusting for the share consolidation, further raising its market capitalisation to RM144.6 million.

Over at HLI, the distribution of 345.03 million Hume Industries shares it received from the deal had seen its share price rise from an average of RM5.275 for the five market days up to Sept 10, 2013 (being the last market day prior to the announcement of the disposals) to close at RM5.70 on Sept 12, 2013. HLI’s share price continued to surge to close at RM7.51 on Oct 13, 2013,  being the market day immediately prior to the ex-date for the capital distribution.

Hong Leong Investment Bank acted as principal adviser to both Hume Industries and HLI in the exercise.

This article first appeared in The Edge Malaysia Weekly, on 22 - 28 December 2014.

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