KUALA LUMPUR (May 30): Guan Chong Bhd and Teoh Boon Hak plan to dispose of a 70% equity interest in GCB Specialty Chocolates Sdn Bhd (GCBSC) to Singapore's Fuji Oil Asia Pte Ltd, for RM12.81 million, cash.

The deal is expected to bring in earnings of about RM8.1 million to Guan Chong, which should reduce its gearing from 2.2 times to 2.01 times upon the repayment of bank borrowings, according to its bourse filing today.

The Johor-based cocoa processor said it has, together with Teoh, entered into a share sale and purchase agreement with Fuji Oil Asia to dispose of the equity stake in GCBSC, which involves 14 million ordinary shares of RM1 each.

Teoh holds 7.5% equity interest or 1.5 million shares in the chocolates and cocoa-derived food ingredients trading unit, in which he is a director. Guan Chong, meanwhile, holds the remainder 92.5% or 18.5 million shares.

Teoh will get RM960,750 of the disposal consideration for selling 1.05 million shares, while Guan Chong will get the balance RM11.85 million for giving up 12.95 million shares, which it expects to use for working capital within six months.

Upon completion of the deal, GCBSC will no longer be a subsidiary of Guan Chong, and will become its associate.

The parties also simultaneously entered into a joint venture agreement to cooperate and build up GCBSC's business.

"The proposed disposal presents an opportunity for Guan Chong to unlock its investment in the group to streamline its operations and to focus on the core business of manufacturing and marketing of cocoa-derived food ingredients and cocoa products," said Guan Chong.

Its share price settled unchanged at RM1.03 today, for a market capitalisation of RM492.25 million.