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This article first appeared in The Edge Financial Daily on December 5, 2019

KUALA LUMPUR: China Automobile Parts Holdings Ltd’s (CAP) proposed acquisition of Local Assembly Sdn Bhd (LA) hit a snag after the memorandum of understanding (MoU) between both companies was terminated.

In a filing with Bursa Malaysia yesterday, CAP said the MoU was terminated after the sellers of LA’s assets said they had not received a valid and executed term sheet from Bursa Practice Note 17 (PN17) company CAP.

“The board [of CAP] notes that the proposed acquisition of LA was intended to form part of the proposed regularisation plan [for CAP]. As such, the board wishes to reiterate its commitment in formulating a regularisation plan pursuant to PN17 of the Main Market listing requirements. The board also wishes to inform that it is currently deliberating on its next course of action and will make the necessary announcement(s) in due course,” CAP said.

According to CAP, LA, via its solicitors’ letter dated Nov 25, 2019, informed that in view that the sellers of LA had not received a valid and executed term sheet, it shall be deemed that CAP no longer intends to continue with the proposed acquisition of LA.

CAP said: “In such event, all negotiation, and the MoU dated July 5, 2019, between the parties shall automatically be deemed terminated.”

“The seven-market-day delay in the announcement of the termination of MoU was due to [the] company’s efforts to liaise with the sellers to reverse the said termination. However, as at the date of this announcement, the company has exhausted all means to do so and is unable to reverse the said termination,” CAP said.

On July 5 this year, CAP said in a Bursa filing that LA was a subcontractor assembler of electrical appliances and equipment, and manufacturer of plastic injection moulded components.

CAP said then it had entered into the MoU with LA to negotiate in good faith with a view of signing definitive sale and purchase agreements for the acquisition of shares and assets in LA.

CAP was classified as a PN17 company in January 2018 after its auditors expressed a disclaimer of opinion on CAP’s audited financial statements for financial year ended Dec 31, 2015.

CAP’s share trade has been suspended since June 8, 2017. The counter was last traded at one sen, giving the company a market capitalisation of RM13.62 million.

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