KUALA LUMPUR (Sept 25): Mieco Chipboard Bhd (Mieco) is selling its wholly-owned unit Mieco Wood Products Sdn Bhd, which is principally engaged in reforestation, for RM35 million, cash, to repay borrowings and for additional working capital.

The deal is expected to net it a disposal gain of about RM34.95 million — after sale related expenses — which will result in an increase in basic earnings per share of approximately 16.65 sen per share, according to its filing with Bursa Malaysia this evening.

Mieco said it has inked a conditional sale and purchase agreement with Anjakan Kekal Sdn Bhd (AKSB) for the entire issued and paid-up share capital of Mieco Wood.

Mieco said the sale consideration was arrived at on a willing-buyer willing-seller basis, and is according to a value of RM3,500 per acre of forest management rights.

Mieco Wood has forest management rights on approximately 10,000 acres in Kemasul, Pahang, for no more than 60 years with an initial approved period of 30 years. AKSB, on the other hand, is engaged in the cultivation of rubber trees.

Under the agreement, the proposed sale is conditional upon the consent of Mieco's lenders being obtained within two months from the date of the agreement.

In the event the condition precedent is not fulfilled in that period, the parties shall extend the time by another one month.

"The board of Mieco is of the view that the proposed sale of Mieco Wood is in the best interest of the group as it represents an opportunity for Mieco to realise cash for part payment of the group's bank borrowings and additional working capital purposes," the filing read.

It added the breakdown of the proceeds' utilisation can only be determined at a later date, subject to agreement with Mieco's lenders.

Barring unforeseen circumstances and subject to all the required approvals being obtained, the proposed sale is expected to be completed within four months from the date of the execution of the agreement, it added.

The chipboard maker said the proposed sale will not have any effect its issued and paid-up share capital, or the shareholdings of its substantial shareholders as it is a cash deal.

Shares in Mieco closed 0.5 sen or 0.52% higher at 96.5 sen today for a market capitalisation of RM202.65 million.

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