KUALA LUMPUR (April 16): Handal Resources Bhd today inked a share sale agreement that would pave the way for a reverse takeover (RTO) of the integrated offshore crane services provider by oil and gas (O&G) player Borneo Seaoffshore Engineering Sdn Bhd (BSOE) in a deal worth RM25.5 million.

BSOE is principally involved in the provision of maintenance services of riser and pipeline isolation services located at offshore platforms and offshore rigs. 

In a filing with Bursa Malaysia, Handal said it has signed a conditional share sale agreement with SeaOffshore Capital Sdn Bhd to acquire 408,000 shares or a 51% stake in BSOE, and that consideration would be satisfied via the issuance of 42.86 million new Handal shares and 26.06 million new irredeemable convertible preference shares (ICPS) in Handal at 37 sen each.

Current shareholders of SeaOffshore Capital are Sunildeep Singh Dhaliwal (45%), who is also group managing director of Handal, Tengku Munawir Islahuddin (30%) and Mohamad Ismail (25%).

It worth noting that SeaOffshore Capital is already a major shareholder of Handal, holding a 14.85% stake. After the proposed acquisition, which is slated for completion in the third quarter of 2019, SeaOffshore Capital will hold a 31.55% – just short of the 33% threshold required to trigger a mandatory general offer (MGO).

And upon the completion of the exercise and assuming full conversion of the ICPS, SeaOffshore Capital's shareholdings will increase to 39.82%, which would then trigger a MGO.

According to Handal, SeaOffshore Capital and the the persons acting in (PACs) have no intention to make a general offer for the remaining Handal shares not already owned by them and will be mindful of the threshold of 33% when converting the ICPS.

"Should SeaOffshore Capital wish to exercise the ICPS, it and the PACs may make an application to the Securities Commission Malaysia to seek an exemption for itself and the PACs from the obligation to extend a MGO for all the remaining Handal shares," it said.

In a separate statement, Handal said the proposed acquisition comes with a profit guarantee of RM5 million from BSOE for the financial year ending June 30, 2020, which will be immediate earnings to be recognised by the group.

"The proposed acquisition will equip Handal with the provision of maintenance of riser and pipeline isolation services located at offshore platforms and/or offshore rigs. This will essentially fortify the group’s service offerings to existing clients, as well as open up more opportunities to the group in participating for more upstream O&G projects," it added.

Upon the completion of the exercise and assuming full conversion of the ICPS, Handal also said its gearing will be lowered to 0.23 times, from 0.28 times as at Dec 31, 2017. 

Handal executive vice-chairman and second-largest shareholder Mallek Rizal Mohsin said the group foresees inorganic growth as one of the faster routes to expand its presence in the O&G industry.

"The proposed acquisition represents a horizontal expansion, complementing Handal's existing business operations. This would enable Handal to become a fully integrated O&G solutions provider in the maintenance service subsector where the enlarged Handal group will be able to provide complete maintenance services for offshore platforms such as offshore pedestal cranes, risers and pipelines. 

"The proposed acquisition will also provide an injection of outstanding orderbook of RM215.4 million, which will significantly increase Handal’s outstanding orderbook size by 3.9 times, from the current outstanding orderbook of RM54.9 million," Mallek added.  

Shares of Handal closed up 2.5 sen or 7.14% at 37.5 sen today, with 254,000 shares done, valuing the group at RM65.87 million. Year-to-date, its share price has risen 17% from 32 sen on Dec 31, 2018.