China Automobile takes another stab at PN17 exit

China Automobile takes another stab at PN17 exit
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KUALA LUMPUR (July 2): China Automobile Parts Holdings Bhd (CAP) is making another attempt at regularising its Practice Note 17 (PN17) condition by inking a memorandum of understanding (MOU) with several vendors for the acquisition of Singapore-based Tenda Construction Equipment Pte Ltd and Tenda Equipment & Services Pte Ltd. 

In a filing with the bourse, the company said it had entered into the MOU with Lee Seng Guan, Tan Gim Yiam, Lee Hay Chiang and Lee Peng Quan to negotiate on a definitive share sale agreement for the acquisition of the entire equity interest in the two companies.

The target companies are involved in the provision of repair and maintenance of construction and civil engineering machinery and equipment, as well as the provision, renting and sale of the machinery and equipment.

CAP said the proposed acquisition involves the incorporation of a new holding company (Newco), with target companies to be acquired via the issuance of Newco’s shares. 

The exercise also includes a proposed exchange of CAP shares with Newco shares, proposed shares placement by Newco and a proposed transfer of listing status from CAP to Newco. 

“The MOU allows the parties to negotiate exclusively for at least a period of six months, and sets out the understanding and intention in respect of the Proposed Regularisation Plan. The proposed acquisition is part of the company’s regularisation plan to regularise the company’s PN17 condition and maintain its listing status on the Main Market of Bursa Securities,” said CAP. 

This marks CAP’s third attempt to regularise its financial condition, after its plan to inject a property development business fell through in May this year, following another failed bit to acquire Local Assembly Sdn Bhd – a subcontractor assembler of electrical appliance and equipment, and plastic injection moulded components manufacturer.

 China Automobile shares have been suspended from trading since June 8, 2017, after it failed to release its financial reports within stipulated time. To date, the company still has not issued its outstanding 2017 and 2018 annual reports, after it last reported a net loss of RM77.12 million in its financial year ended Dec 31, 2016. 

It slipped into PN17 status in January 2018, after its external auditor Messrs PFK expressed an audit disclaimer of opinion in the company’s audited financial statements for FY15 on undisclosed material liabilities.

S Kanagaraju