KUALA LUMPUR (April 9): Property and construction group Sunway Bhd is acquiring two hardware distributors — Winstar Trading Sdn Bhd and PND Hardware & Trading Pte Ltd — for a combined RM137.82 million.
The acquisitions are expected to be completed in three annual tranches, with the final tranche completing in the second quarter of 2018.
In a filing with Bursa Malaysia today, Sunway (fundamental: 1.5; valuation: 1.8) said its wholly-owned unit Sunway Holdings Sdn Bhd (SunHoldings) has signed two separate share sale agreements (SSAs) with Winstar vendors to acquire Winstar Trading for RM130.95 million, and with PND vendors to buy PND at S$2.57 million (RM6.87 million).
Under the SSAs, both Winstar and PND vendors have guaranteed net profit of RM15 million and S$250,000 respectively per year, for the financial years ending Dec 31, 2015, 2016 and 2017, in proportion to Sunway’s stake in the two companies.
In Malaysia, Winstar are sole exclusive distributors of household hardware names such as WD-40, Araldite and Esicut, and authorised distributors of brands such as Bosch, Skil, 3M, Bahco, Cigweld, Selley, Stanley, Norton and GP Battery. Winstar and PND also distribute 17 in-house brands including Nietz, Winsir, Cyber, Galaxy, Buick and StarWeld.
Sunway said the proposed acquisitions provide opportunities for its trading and manufacturing division to acquire profitable market leaders with over 30 years of experience in the wholesaling of hardware market.
"It also provides an additional revenue stream, which will further diversify the risks of the group.
"The group anticipates synergies from cross-selling across the customer base of Sunway, Winstar Trading and PND, and potential cost savings from warehousing facilities due to economies of scale," it said.
"There is also potential for Winstar Trading and PND to supply to Sunway’s property and construction projects in the future," it added.
Upon the completion of both acquisitions, Winstar Trading and PND will become a subsidiary of SunHoldings.
Sunway shares closed unchanged at RM3.76 today, giving it a market capitalisation of RM6.51 billion.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)