This article first appeared in The Edge Financial Daily on December 19, 2018

KUALA LUMPUR: TransOcean Holdings Bhd yesterday inked a preliminary agreement that would pave the way for a reverse takeover (RTO) of the company by logistics player Swift Haulage Sdn Bhd in a deal worth no less than RM750 million.

In a stock exchange filing, TransOcean said it had signed a heads of agreement (HoA) with certain Swift shareholders to acquire the entire equity interest in Swift, and that consideration would be satisfied entirely via the issuance of new shares in TransOcean at an issue price of RM1.50 per TransOcean share (consideration share).

News of the proposed deal sent TransOcean shares soaring. It closed at its highest point of 96.5 sen after rising 30 sen or 45.11% to hit the limit-up. The latest share price values the group, which also offers logistics services, at RM39.57 million. The counter was Bursa Malaysia’s third biggest gainer of the day.

The HoA was inked with Swift vendors Kenanga Nominees (Tempatan) Sdn Bhd, Persada Bina Sdn Bhd, Laserforms Sdn Bhd, Angka Dayamas Sdn Bhd, Bluefin Bidco Ltd, Glory Portfolio Sdn Bhd and Ng Chee Kin. They collectively hold a 77.2% equity interest in Swift.

The parties agreed that the entire equity interest in Swift (on an as-converted basis) should be valued at and will be acquired by TransOcean at a purchase price of not less than RM750 million, subject to due diligence, said TransOcean.

“In the event TransOcean carries out any corporate exercise which results in adjustments to the share price of TransOcean shares and/or number of TransOcean shares in issue, the issue price per consideration share shall be adjusted accordingly,” TransOcean said.

It said the HoA allows the parties to negotiate the terms of a share sale agreement (SSA), which upon signing will enable TransOcean to explore the acquisition of Swift’s logistics operations.

“Both parties shall during the term of the HoA be given the opportunity to review and to conduct due diligence on each other for a period of three years prior to the HoA,” TransOcean said.

Under the HoA, they have to ink a definitive SSA within 60 days from the preliminary deal’s date. If not, an automatic extension of 30 days shall be allowed.

“In the event the parties are still unable to finalise the SSA by the end of the extended term, the parties shall discuss in good faith to mutually agree on such further extensions,” TransOcean said.