KUALA LUMPUR (Nov 8): Nationwide Express Courier Services Bhd plans to merge its existing courier business with that of Airpak Express (M) Sdn Bhd through the acquisition of the latter's entire issued share capital for RM33.16 million.

In a filing with Bursa Malaysia today, Nationwide Express said the proposed acquisition is part of the group's overall strategy to capitalise on the rapid growth in demand for e-commerce and online business activities.

"With the growing number of new online market places, the proposed acquisition is timely for the group to build its capabilities and capacities in the business-to-consumer (B2C) segment and thereby enhance revenue growth from the e-commerce last mile delivery services," it said.

Nationwide Express said the proposed acquisition will also enable the enlarged group to benefit from potential cost savings, improve business efficiencies and achieve economies of scale across group-wide operations, which in turn will help fortify its presence in the courier service industry.

The group today signed a conditional share acquisition agreement to acquire 657,001 shares (90%) and 73,000 shares (10%) in Airpak from Ong Eng Lee and Lim Kew Wan respectively.

The RM33.16 million purchase consideration will be satisfied by RM30 million in cash and the issuance of 6.33 million new shares in Nationwide Express Holdings Bhd (NEHB) at an issue price of 50 sen apiece, which is equivalent to RM3.16 million.

Nationwide Express said the proposed acquisition will be funded through internal funds and bank borrowings, of which the breakdown will be determined later.

But with the consolidation of Nationwide Express following the acquisition of Airpak, its net gearing level will increase significantly from 0.07 times to 0.61 times, assuming that the cash payment of RM30 million is funded by interest bearing borrowings.

Under the deal, Ong also guarantees a net profit of RM5 million each for the financial year ending July 31, 2017 (FY17), and FY18. It added that any shortfall of the profit will be made good by Ong for both the periods within 14 days after notice is given by Nationwide Express enclosing the audited accounts of Airpak.

The proposed acquisition is conditional upon the completion of an ongoing internal reorganisation within Nationwide Express, approval of Nationwide Express shareholders, increase in its authorised share capital (if necessary), and issuance and allotment of the Nationwide Express consideration shares to both Ong and Lim.

It is also subject to the latest consolidated audited accounts as at July 31, 2016, of Airpak having been duly furnished to Nationwide Express, as well as other due diligence by Nationwide Express on the financial, legal, contractual, tax and trading position and financial prospects of future profitability of Airpak and its subsidiary.

Airpak Group has a network of 58 service points throughout Malaysia. Other than domestic courier activities, Airpak through its international network also facilitates and services the Malaysian market with international inbound deliveries with its focus on the growing e-commerce logistics business, according to the filing with Bursa.

Nationwide Express shares gained 5 sen or 5.18% to close at 91 sen today, with 137,100 shares traded. At this level, it has a market capitalisation of RM53.8 million.