Mercury to diversify into construction

PETALING JAYA: Mercury Industries Bhd, a paints products manufacturer, is planning to buy a 70% stake in construction outfit Paramount Bounty Sdn Bhd for RM42 million, marking its entry into the construction industry.
Last Friday, the company entered into a conditional share sale agreement with its executive director Datuk Tiong Kwing Hee in a related party deal to acquire 700,000 shares or 70% interest in Paramount Bounty, which is involved in civil and building construction works. Tiong is a substantial shareholder in Mercury, holding a 7.26% stake.
Tiong is also the group CEO and executive director of EcoFirst Consolidated Bhd.
Mercury said the group's revenue for the past three financial years have been adversely affected due to dampened income and capital expenditure of the local economy contributed by uncertainties in the global economy and external-related sectors.
"Higher operating costs and impairment loss on the group's inventories and receivables in recent months, added further pressure on the profitability of the group.
"[Hence] the board had identified the proposed acquisition as a new business opportunity for the group to obtain a new source of income, diversify its revenue contribution and to reduce the group's dependence on the auto refinish industry," it added.
The proposals are expected to be completed in the second quarter of 2015.
Moving forward, the group expects the construction business to grow and subsequently become a major contributor to the group's earnings.
In the same statement, Mercury said Paramount Bounty recorded an audited profit after tax of RM6.5 million for the financial year ended Dec 31, 2014. As at Dec 31, 2014, Paramount Bounty has an audited net asset of RM16.2 million.
Mercury said it will be carrying out a due diligence review on Paramount Bounty, within the conditional period.
The company intends to procure bank borrowings of about RM30 million to finance the purchase consideration, whilst the remaining balance will be funded via internally-generated funds."