KUALA LUMPUR (Sept 23): WZ Satu Bhd has filed a RM59.21 million lawsuit over the failure by its subsidiary to achieve the profit guarantee and shareholders' fund guarantee given in 2014 when the subsidiary was acquired.

In a filing today, the group said it is suing Datuk William Tan Chee Keong, Choi Chee Ken and Pacific Trustees Bhd over WZS BinaRaya Sdn Bhd's failure to achieve the two guarantees stated in the share sale agreement (SSA).

Under SSA, Tan and Choi who sold the business to WZ Satu had guaranteed that the aggregate audited profit after tax and minority interest of WZS BinaRaya and its subsidiaries for the financial years ended Aug 31, 2015, 2016 and 2017 would collectively be not less than RM17 million.

It had also been guaranteed that the shareholders' funds of WZS BinaRaya as at the last day of the guaranteed period would be at least RM27.5 million.

Pending the fulfilment of the two guarantees, 25 million WZ Satu shares were to be held by Pacific Trustees as security (consideration shares) for the guarantees as part of the stakeholder agreement among WZ Satu, Tan, Choi and Pacific Trustees.

However, it was found that there were profit shortfall of RM59.21 million and shareholders' fund shortfall of RM58.96 million during the period of the guarantees.

If Tan and Choi fail to pay for the shortfall in cash, Pacific Trustees is authorised to dispose of the consideration shares.

As such, WZ Satu is claiming RM59.21 million from Tan and Choi, an interest rate of 5% on claimed sum from today until full realisation, payment of costs and other relief deemed appropriate by the court.

Meanwhile, WZ Satu is seeking an order to compel Pacific Trustees to sell the consideration shares, and pay any proceeds from the sale to WZ Satu to account for the shortfall, as well as other relief deemed appropriate by the court.

"Apart from the amount claimed by the company and the corresponding legal costs, the [suit is] not expected to have any other material financial impact on the company for the financial year ending Dec 31, 2020," said WZ Satu.

WZ Satu's share price fell two sen or 9.09% to 20 sen today, valuing the group at RM102.3 million. The counter saw 28.52 million shares change hands.