Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on February 17, 2020 - February 23, 2020

TOP Glove Corp Bhd is understood to be in talks to take over competitor Latexx Partners Bhd, sources familiar with the matter tell The Edge.

The talks are said to have been ongoing for some time now, with a deal likely to be concluded soon, the sources add. “Expect an announcement as early as next week,” one of the sources says.

When contacted, Tan Sri Lim Wee Chai, executive chairman and controlling shareholder of Top Glove with a 35.8% stake, says via a text message, “We have no comment on the issue.”

Latexx, which operates in the Kamunting Industrial Estate in Perak, was delisted from Bursa Malaysia in early June 2013, after it was privatised by Austria-based rubber and plastic products maker Semperit AG Holding.

Back in 2012, Semperit made an offer for Latexx, valuing it at RM603 million, after securing a 47.3% stake in the company from its substantial shareholders, including its chairman and CEO Low Bok Tek, who sold his entire 29.3%, and eight other shareholders, who disposed of 9.1%.

Semperit, which had its own rubber glove business, became the second-largest rubber glove maker in the world — behind Top Glove — after taking over Latexx.

Checks on CTOS indicate that Semperit owns 98.56% of Latexx with the remaining stake being highly fragmented and held by more than 20 shareholders.

In its financial year ended Dec 31, 2018, Latexx suffered an after-tax loss of RM233.56 million on sales of RM691.17 million. In FY2017, it recorded an after-tax loss of RM206.21 million on sales of RM691.96 million.

In its five financial years from FY2014, the company managed only two years of profitability — a profit after tax of RM8.15 million in FY2015 and a little over RM4 million in FY2014.

As at Dec 31, 2018, Latexx had accumulated losses of RM320.75 million, total assets of RM399.56 million and total liabilities of RM462.37 million.

Top Glove, meanwhile, is the world’s largest rubber glove manufacturer, producing 70.5 billion pieces a year, or an estimated 26% of world consumption.

In its first financial quarter ended Nov 30, 2019, Top Glove registered a net profit of RM111.43 million on revenue of RM1.21 billion. Its cash and bank balances stood at RM154.21 million and its investment securities at RM120.32 million. Its long-term debt commitments were in excess of RM1.3 billion while its short-term borrowings amounted to RM1.19 billion.

On its prospects, Top Glove says, “The group will continue pursuing expansion in order to meet the increase in global glove demand, which is set to grow by 10% yearly.”

The company plans to boost its total number of production lines by 178 and total capacity by 21.3 billion pieces a year. This represents an increase in capacity of 30.4% over the next two years.

“By December 2021, Top Glove is projected to have 861 production lines and a production capacity of 91.4 billion pieces a year … In addition, the group will continue to explore mergers and acquisitions and joint ventures while diversifying into rubber or healthcare-related businesses,” the company says.

Top Glove’s share price has been rallying, gaining close to 25% or RM1.20 since the beginning of the year. It closed at RM5.85 last Friday, giving the company a market capitalisation of RM14.98 billion.

Earlier this year, Top Glove’s wholly-owned subsidiary TG Excellence Bhd lodged a perpetual sukuk programme with the Securities Commission Malaysia, enabling it to issue unsecured and subordinated perpetual sukuk from time to time, subject to the aggregate outstanding nominal amount not exceeding RM3 billion at any point in time.

In its announcement, Top Glove says “the proceeds raised from the perpetual sukuk programme are intended to be utilised by the company and/or its subsidiaries, associated companies and/or jointly controlled entities to refinance its existing financing/debt obligations (whether in whole or in part), repayment of inter-company borrowings and/or to finance working capital requirements, investments, acquisitions, capital expenditure and/or its general corporate purposes”.

 

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