KUALA LUMPUR (Jan 29): Glove-dipping line manufacturer HLT Global has entered into a conditional share sale agreement (SSA) for the acquisition of 5.775 million shares or a 55% equity stake in HL Rubber Industries Sdn Bhd (HLRI), for RM33 million.

In a statement, the company said the agreement was signed with vendors Suntel International Co Ltd, AXG Capital Sdn Bhd and Lee Sow Yin, with the purchase consideration to be satisfied via the issuance of 113.79 million HLT shares at 29 sen per share.

The agreement formalises the Heads of Agreement (HOA) entered into on Jan 11.

Under the agreement, the vendors have guaranteed a minimum profit after tax of RM10 million for the financial years ending Dec 31, 2018 (FY18) and FY19 and audited net assets of RM38.8 million.

Based on an average profit guarantee of RM5 million per year, the purchase consideration translates into an implied price-to-earnings multiple of 12 times, said HLT Global.

“In line with our continuing effort to explore avenues to enhance HLT Global group’s revenue and profitability, the proposed acquisition will enable HLT Global to diversify its earnings base and reduce its dependency solely on its existing fabrication business,” said ,” said HLT Global executive director and chief executive officer Chan Yoke Chun.

“Through the proposed acquisition, HLT Global would be able to integrate its existing business in the fabrication of glove-dipping lines with the downstream business of HLRI in the manufacturing and trading of rubber gloves, which is complementary and synergistic to the HLT Global group,” added Chan.

The group intends to vary the utilisation of the unutilised proceeds from its listing of RM10.5 million, which will be reallocated to finance the upgrading of eight of the 16 existing glove-dipping lines and the setting up of one new glove-dipping line for the production of special industrial gloves at the existing factory premises of HLRI.

The balance will be used for working capital requirements of the group.

“Leveraging on the company’s core expertise and track record in the fabrication of glove-dipping lines, HLT Global would be able to improve the production efficiency and effectiveness of the existing glove-dipping lines of HLRI, thereby strengthening the rubber gloves manufacturing processes and competitiveness of HLRI in the rubber gloves industry, and eventually the financial performance and profitability of the HLT Global group,” said Chan.

HLT Global’s share price fell 0.5 sen or 1.75% to 28 sen, giving it a market capitalisation of RM113.48 million.