KUALA LUMPUR (Dec 9): LTKM Bhd said it intends to review the terms of the proposed RM336 million reverse takeover deal proposed earlier this year due to challenging market conditions.
In a filing with Bursa Malaysia on Friday (Dec 9), the chicken egg producer said it had submitted a withdrawal of the application in relation to the proposals, which were submitted to the Securities Commission Malaysia for approval on the same day.
“The decision of the board was made after taking into consideration, among others, the current volatile market condition, and with the agreement of the counterparties to the disposal SPA (sales purchase agreement) and SSA (share sale agreement).
“Nonetheless, both the disposal SPA and SSA have not lapsed, and LTKM will continue to negotiate the terms of the proposals with the relevant parties to the agreements, and shall make the necessary announcements upon finalising the terms thereto,” it said.
In April, LTKM proposed to sell its existing chicken egg production business to become an electronic manufacturing services (EMS) provider in a corporate revamp, which will see the emergence of new controlling shareholders in LTKM who plan to change its name to LA Technology Bhd.
LTKM said: "The objective of the proposals, taken as a whole, is for LTKM to divest its existing non-profitable businesses, acquire a new viable and profitable business, while at the same time, rectify its non-compliance with the public spread requirement."
In a bourse filing, LTKM said it had entered into an SSA with shareholders of EMS business Local Assembly Sdn Bhd to acquire one million ordinary shares or 100% equity interest in the company for RM336 million, which will be satisfied by a combination of RM100 million in cash and the issuance of 393.33 million new LTKM shares at an issue price of 60 sen each.
Notably, one of Local Assembly's indirect shareholders is Chin Hin Group Bhd chairman Datuk Seri Chiau Beng Teik, who is deemed interested by virtue of Divine Inventions Sdn Bhd's 20% stake in the company. Divine Inventions is a wholly-owned subsidiary of PP CH Realty Bhd, in which Chiau has a 55% stake.
The chicken egg producer said it will also seek an exemption for Local Assembly's shareholders to mandatorily make a takeover offer for its remaining shares that they do not already own after the deal is concluded.
In addition, the company also seeks to undertake a restricted issue of 230 million new LTKM shares, representing 33.1% of the enlarged share capital of LTKM, to investors who will be identified later.
Once the share sale and restricted issue are concluded, Chiau, along the other Local Assembly share vendors, will become major shareholders of LTKM with a combined 56.6% stake, while Local Assembly itself will become a wholly-owned subsidiary of the listed entity.
Under the proposed acquisition, the vendors have also provided a profit guarantee for Local Assembly of a minimum profit after tax (PAT) of RM28 million for the financial year ending Dec 31, 2022 (FY2022), or not less than an aggregate of RM50 million in PAT for FY2022-23.
Based on the guaranteed PAT of RM28 million for FY2022, the purchase consideration represents a price-earnings multiple of 12 times.
At the same time, LTKM also announced that it will dispose of its existing business to Ladang Ternakan Kelang Sdn Bhd (LTKSB) for a total cash disposal consideration of RM158.83 million.
LTKSB, which holds 71.6% of equity interest in LTKM, is also the holding company of LTKM.
Meanwhile, LTKM proposed to undertake a proposed special dividend cum capital repayment of RM1.11 per share on an entitlement date to be determined and announced at a later date, and consolidate two existing LTKM shares into one LTKM share after the proposed special dividend cum capital repayment.
At the midday break, LTKM had shed 0.69% or one sen to RM1.43, with 5,800 shares done.