KUALA LUMPUR (June 15): Citaglobal Bhd (formerly known as WZ Satu Bhd) on Wednesday announced that it has entered into a share purchase agreement with TIZA Global Sdn Bhd (formerly known as Citaglobal Sdn Bhd) for the proposed acquisition of the entire equity interest in Citaglobal Engineering Services Sdn Bhd (CESSB).
The proposed acquisition is for an indicative purchase consideration of RM140 million via the issuance of 736.84 million new shares in Citaglobal at an issue price of 19 sen per share.
In a statement, Citaglobal said the proposed acquisition comes with an aggregate net profit guarantee of RM60 million for three full financial years of 2022, 2023 and 2024.
In conjunction with the proposed acquisition, Citaglobal is proposing to undertake the proposed share consolidation to consolidate every five shares into one share, on an entitlement date to be determined and announced later after the completion of the proposed acquisition.
Subsequently, TIZA Global's shareholding in the company will increase from nil to more than 33% upon issuance of the consideration shares.
As a consequence, Citaglobal said TIZA Global and its persons acting in concert (PACs) will be obligated to extend a mandatory offer to acquire all the remaining securities in Citaglobal not already owned by TIZA Global and its PACs.
"In line with the objectives and strategy of Citaglobal to deliver sustainable growth and value creation to the shareholders, the proposed acquisition will enable the group to capitalise on the resources, expertise and strengths of the enlarged CESSB in securing projects and contracts.
"[This] thereby enhances and strengthens the order book, financial position and prospects of the enlarged Citaglobal," said Citaglobal executive chairman and president Tan Sri Mohamad Norza Zakaria.
Mohamad Norza noted further the settlement of the purchase consideration via issuance of consideration shares will allow Citaglobal to enhance its engineering and construction segment without any immediate impact on the cash flow and gearing levels of the group.
"In addition to providing an opportunity for Citaglobal to bolster its earnings stream, the profit guarantee will also contribute positively to the earnings of the enlarged group which in turn creates value for the shareholders of Citaglobal," he said.
According to Citaglobal, CESSB has a total confirmed order book of approximately RM193 million, comprising construction, network construction and related projects, and sand mining operations.
In addition, CESSB has various projects currently being pursued which are mostly under bilateral or direct negotiations with construction and network construction project owners amounting to approximately RM1.67 billion.
Citaglobal meanwhile had an existing order book of RM539 million as of March 31, 2022. Coupled with CESSB's order book of RM193 million, Citaglobal will thus have a total order book of RM732 million.
"Over the next few years, one of the biggest drivers for Citaglobal will be Malaysia's 5G network roll-out.
"Once the group completes the proposed acquisition, it will be on track to benefitting from the development of 5G telecommunication towers across the country as CESSB is a licensed network facilities provider," added Mohamad Norza.
Barring any unforeseen circumstances, Citaglobal said the proposed acquisition is expected to be completed by the third quarter of 2022, while the proposed share consolidation is expected to be completed by the fourth quarter of 2022.
Citaglobal's share price settled 5.26% or one sen higher at 20 sen, bringing a market capitalisation of RM212.2 million.