KUALA LUMPUR (June 14): Hextar Global Bhd has executed an RM89 million Islamic financing facility from OCBC Al-Amin Bank Bhd to finance its purchase of Alpha Aim (M) Sdn Bhd and Chempro Technology (M) Sdn Bhd (Chempro business), which provides specialty chemical products for the cleaning, hygiene and food industry, as well as the rubber glove industry in Southeast Asia.

In a stock exchange filing today, the agrochemical company said the facility is expected to increase its consolidated gearing from 0.29 times to 0.79 times. The facility will be secured by way of corporate guarantee by its wholly-owned subsidiary Hextar Chemicals Sdn Bhd.

"Among the terms of the letter of offer (are that) Hextar Chemicals, Alpha Aim and Chempro will remain as the subsidiaries of Hextar, the leverage ratio of Hextar to be maintained at not more than 2.5 times, and its finance service coverage ratio to be maintained at not less than 1.25 times," it added.

The Term Financing-i Commodity Murabahah will be based on a floating rate, and its tenure will be for a period of five years to be repaid via 20 quarterly principal instalments.

Separately, Hextar said it has obtained shareholders’ approval for its proposed bonus issue, proposed acquisition of the Chempro business, as well as the proposed diversification of business activities at its virtual extraordinary general meeting held today.

Hextar has proposed to undertake a three-for-five bonus issue of up to 492 million new shares held on the entitlement date of June 28.

It added that the proposed acquisition of the Chempro business and proposed diversification will enable Hextar to expand its product offering and venture into the specialty cleaning chemicals industry, "which is currently experiencing increased demand due to increasing hygiene and cleanliness awareness, as well as demand from the rubber glove industry and the food and beverage sector".

The proposals are targeted to be completed by the second quarter of this year.

"We are confident that the Chempro business will add value to Hextar Group, as the share sale agreement comes with a profit guarantee of RM39 million over three years, which translates to a profit after tax of RM13 million a year until the financial year ending Dec 31, 2023," said Hextar executive director Datuk Eddie Ong Choo Meng in a separate statement.

"Although they are manufacturing a different type of product compared with our existing core business, we expect these products to command strong margins and further strengthen our foothold in the chemicals industry. As rubber glove manufacturers are major end users of specialty cleaning chemicals and with Malaysia being the leading rubber glove manufacturer in the world, we foresee great potential for this business and significant synergies within the Hextar Group.

"We see this as the right path to take, in line with the growth strategy and expansion plans of the Hextar Group and we aspire to be a market leader in this industry," he added.

Hextar shares rose five sen or 3.07% to close at RM1.68 today, giving the group a market capitalisation of RM1.38 billion.