This article first appeared in The Edge Financial Daily on November 29, 2019

KUALA LUMPUR: 7-Eleven Malaysia Holdings Bhd plans to acquire a 25.35% stake in Caring Pharmacy Group Bhd. This will raise the convenience store operator and related parties’ shareholding in the pharmacy chain to 38.57%, triggering a mandatory general offer (MGO).

7-Eleven is buying the 55.2 million shares for RM143.51 million cash, or RM2.60 per share.

It said in a Bursa Malaysia filing yesterday the acquisition will be undertaken by its wholly-owned  Convenience Shopping (Sabah) Sdn Bhd (CSSSB) from Motivasi Optima Sdn Bhd. Berjaya Group founder Tan Sri Vincent Tan, who is a major 7-Eleven shareholder, also holds interest in Caring.

CSSSB and parties acting in concert with it 7-Eleven, Tan, Jitumaju Sdn Bhd and U Telemedia Sdn Bhd currently hold in aggregate a 13.22% stake in Caring.

As the aggregate shareholding would exceed 33%, 7-Eleven said it will be obliged to extend a conditional MGO for all remaining Caring shares at RM2.60 per share.

Motivasi Optima will see its stake in Caring cut to 25% from 50.35% on completion of the sale. Its shareholders are Chong Yeow Siang, Soo Chan Chiew, Tan Lee Boon and Ang Khoon Lim. Chong is the managing director of the group while the others are directors. 7-Eleven said the MGO is an opportunity for the group to raise its shareholding in Caring to more than 50%. It, however, intends to maintain Caring’s listing status.

The RM2.60 per share price represents a 4% premium over Caring’s last traded price of RM2.50, and a 18.47% premium over its six-month volume weighted average market price (VWAP) of RM2.19. 7-Eleven will fund the buy via borrowings and internal funds.

With both 7-Eleven and Caring operating in the consumer retail sector, 7-Eleven said the proposals are part of its strategy to expand its network, products and customer base, which is expected to improve the group’s performance. It also presents an opportunity for 7-Eleven to have immediate access to a profitable pharmacy business, and expand into e-commerce by leveraging Caring’s online sales platform.

7-Eleven said the proposals are expected to contribute positively to its future earnings. It expects the proposals to be completed in the first half of 2020.