KUALA LUMPUR (April 12): Reservoir Link Energy Bhd (RLEB) has proposed an acquisition of a 51% equity stake in a special purpose vehicle (SPV) which will be involved in the solar photovoltaic (PV) segment, for RM21.17 million.

In a filing with the bourse, the company said it had entered into a conditional term sheet with Lee Seng Chi, outlining their mutual intention of entering a share sale agreement (SSA) for the company’s proposed acquisition of a 51% stake in the SPV, into which identified business and asset of Solar Bina Engineering Sdn Bhd will be injected.

Lee is the sole shareholder and managing director of Solar Bina, which is involved in the provision of implementation of solar photovoltaic (PV) projects for residential, commercial and industrial properties as well as large scale solar PV plants.

RLEB said the SPV is intended to be principally involved in the provision and implementation of solar PV projects similar to those currently being undertaken by Solar Bina.

The company said the purchase consideration for the 51% stake in the SPV would be RM21.17 million, based on a RM41.51 million valuation on the SPV arrived at on a willing-buyer and willing-seller basis.

RM8.46 million or 40% of the purchase consideration will be settled in cash, while the balance 60% will be settled by the issuance of 18.15 million new shares in RLEB at an agreed price of 70 sen per share.

The cash portion of the purchase consideration will be funded via a combination of internally-generated funds, bank borrowings and/or fundraising exercise.

Meanwhile, it said the 70 sen issue price for the shares represents a 1.6% discount to the theoretical ex-all price of RLEB shares of 71.15 sen, calculated based on the five-day volume weighted average market price of RLEB shares up to and including April 9, 2021 of 73.19 sen.

The agreement comes with a profit guarantee of RM13.84 million for the agreed period of 24 months from the completion date.

“In the event of a shortfall in profit guarantee, the vendor may top up the shortfall by payment of cash into the target company,” said RLEB.

It said the proposed acquisition is expected to contribute positively to the future financial performance of the company. 

At the time of writing, RLEB rose 5.5 sen or 7.5% to 79 sen, giving a market capitalisation of RM225.2 million.