Straits Inter Logistics to acquire 55% of peer for RM35.75m

PETALING JAYA: Straits Inter Logistics Bhd plans to acquire a 55% stake in oil bunkering services company Tumpuan Megah Development Sdn Bhd for RM35.75 million to expand its business.
In a filing with Bursa Malaysia today, Straits Inter said it had entered into a conditional share sale agreement with the vendor, Raja Ismail Raja Mohamed.
Straits Inter will pay RM7.80 million cash and RM27.95 million worth of new shares in Straits Inter at an issue price of 24 sen per Straits Inter share.
The acquisition comes with an aggregate profit guarantee totalling RM10 million by the vendor for two financial years ending Dec 31, 2019 and 2020. Based on the 55% stake, the company will be entitled to a yearly profit guarantee of about RM2.75 million for each financial year.
"The board of Straits applauded the proposed acquisition of 55% in Tumpuan Megah, which has similar core business activities as Straits. The total profit guarantee also provides assurance on the earnings potential of Tumpuan Megah, which is expected to contribute positively to the future profitability of Straits on a consolidated basis," Straits Inter group managing director Datuk Seri Ho Kam Choy said in a statement.
He said the proposed acquisition is a horizontal acquisition by Straits Inter to acquire its peer with the intention to expand its existing business activities of bunkering services and oil trading, which is expected to enhance the revenue and earnings of Straits Inter and its subsidiaries moving forward.
"The proposed acquisition would enable Straits to have an immediate expansion in respect of its fleet size and assets base from the current two vessels to nine vessels for its operations. With such expansion of asset base, Straits is capable to undertake higher volume of bunkering services, thereby increase its operational capacities," he added.
Tumpuan Megah currently has its operations in eight ports in Malaysia, all of which are licensed under Petroleum Development Act 1974. It carries out its bunkering services in Malaysia via its seven vessels.
Based on the past three financial years up to Dec 31, 2016, Tumpuan Megah recorded a revenue of about RM215.44 million, RM154.89 million and RM148.69 million respectively. Its net profit was about RM3.16 million, RM1.02 million and RM960,000 for the same period respectively.