KUALA LUMPUR (Dec 24): Home furniture manufacturer Wegmans Holdings Bhd is acquiring a 90% stake in screws, nuts and spare parts manufacturer Wison Screw Industries Sdn Bhd (WSI) for RM16.2 million, as part of its expansion strategy.

The purchase consideration will be settled via issue of new shares.

Wegmans said the products manufactured and traded by WSI are mainly used in furniture industries. As such, the proposed acquisition will allow Wegmans to have control over WSI's management and operations and reap the benefits of future revenue and profit.

"The proposed acquisition will allow Wegmans to consolidate the revenue and profit of WSI which in turn, will contribute positively to the results of the Wegmans Group as a whole in future. The board believes that the proposed acquisition represents a good opportunity for Wegmans to further expand its business and strengthen its future earnings," it said in a filing with Bursa Malaysia today.

Wegmans noted that it has entered into a conditional share sale agreement with BS Value Sdn Bhd and WSI's director Kek Wee Beng to acquire 900,000 ordinary shares of WSI, which will be fully satisfied by the issue and allotment of new Wegmans shares to the vendors.

Upon completion of the proposed acquisition, WSI will become a 90%-owned subsidiary of Wegmans.

As the proposed acquisition will be fully satisfied via the issuance of its shares, Wegmans said this will accelerate the group's expansion plan without any cash outlay. Furthermore, it will also not constrain the group's cash flow for its working capital and future expansion purposes.

As part of the conditions in the agreement, WSI agreed to undertake and guarantee that the actual profit after tax (PAT) in financial year 2021 shall not be less than RM3 million. In the event that the actual PAT does not meet the guaranteed amount, the vendors agree to reimburse Wegmans for the shortfall in cash.

Barring any unforeseen circumstances, Wegmans said the proposed acquisition is expected to be completed by the second quarter of 2021.

Wegmans made its debut on the ACE Market in March 2018, and a little over a year later, it already submitted a proposal to transfer its listing to the Main Market of Bursa Malaysia.

Shares of Wegmans today increased one sen or 2.99% to 34.5 sen with a market capitalisation of RM172.5 million.