KUALA LUMPUR (March 13): UMW Holdings Bhd is seeking to raise up to RM1.1 billion via a rights issue to help fund the acquisition of a 50.07% stake in MBM Resources Bhd (MBMR).

In a filing with Bursa Malaysia today, UMW said it is proposing to undertake the proposed rights issue to primarily repay a bridging facility to be obtained by the group to acquire the 50.07% equity interest in MBMR, as well as the resultant mandatory take-over offer (MO) for the remaining shares.

On Friday, UMW announced its plans to acquire the entire 50.07% stake in MBMR held by Med-Bumikar Mara Sdn Bhd (49.5%) and Central Shore Sdn Bhd (0.57%) for RM501.04 million cash or RM2.56 per share, following which it would undertake a MO for the remaining MBMR shares. At RM2.56 per share, the deal values MBMR at RM1 billion.

MBMR holds an effective 22.58% stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

Under the proposed MO, the offer price of RM2.56 for each remaining MBMR share is to be satisfied either by cash or issuance of new UMW shares at an issue price of RM6.09 per share based on an exchange ratio of 21 new UMW shares for every 50 remaining MBMR shares held.

UMW said the proposed rights issue is intended to raise gross proceeds of up to RM1.1 billion, after taking into consideration the MBMR purchase price, funding for the proposed MO, working capital of the enlarged group and the estimated expenses relating to the proposals.

The cash portion of the proposed Perodua acquisition amounting to RM117.5 million will be funded via internal funds.

"The final quantum of gross proceeds to be raised can only be determined after the closing date of the proposed MO. Accordingly, the entitlement basis for the proposed rights issue and the issue price for the rights shares will only be fixed at a later date," it added.

Assuming full acceptance of the proposed MO in the form of cash consideration, and an illustrative price of RM4.40 per share for a one-for-five share issuance, the group could raise gross proceeds of RM1.07 billion through the proposed exercise.

Its share capital would be enlarged to RM1.96 billion, from RM584.15 million as at Feb 28.

“After due consideration of the various methods of fund-raising available as well as the capital structure of UMW, the board is of the opinion that the proposed rights issue is the most appropriate means of raising funds,” said UMW.

The group said the exercise will not only enable it to repay the bridging facility, but also improve its financial flexibility, optimise capital structure and base, while providing entitled shareholders an opportunity to further increase equity participation without dilution.

Barring unforeseen circumstances and subject to acceptance of the acquisition, the proposed rights issue is expected to be completed by the third quarter of 2018.

UMW shares closed 14 sen or 2.2% up at RM6.49 today, bringing it a market capitalisation of RM7.58 billion. The stock has gained about 9% from its last closing price of RM5.95 prior to the announcement.