PETALING JAYA: Citaglobal Bhd has entered into a share purchase agreement with Tiza Global Sdn Bhd for the proposed acquisition of the entire equity interest in Citaglobal Engineering Services Sdn Bhd (CESSB) for RM140 million via the issuance of 736.84 million new shares in Citaglobal at an issue price of 19 sen per share.
The proposed acquisition comes with an aggregate net profit guarantee of RM60 million for three full financial years ending 2022, 2023 and 2024.
In conjunction with the proposed acquisition, the company is proposing to undertake the proposed share consolidation to consolidate every five Citaglobal shares held by the shareholders of Citaglobal, into one Citaglobal share after the completion of the proposed acquisition. This will lead to a corresponding upward adjustment in the trading price of Citaglobal shares and may reduce the volatility of the trading price.
Citaglobal Bhd executive chairman and president Tan Sri Mohamad Norza Zakaria said the proposed acquisition will enable the group to capitalise on the resources, expertise and strength of the enlarged CESSB group in securing projects and contracts, thereby enhancing and strengthening the order book, financial position and prospects of the enlarged Citaglobal group.
“Furthermore, the settlement of the purchase consideration via issuance of consideration shares will allow Citaglobal to enhance its engineering and construction segment without any immediate impact on the cash flow and gearing levels of the group. In addition to providing an opportunity for Citaglobal group to bolster its earnings stream, the profit guarantee will also contribute positively to the earnings of the enlarged group which in turn creates value for the shareholders of Citaglobal,’’ he said in a statement.
CESSB is principally involved in civil engineering and construction-related business. The group has a total confirmed order book of estimated RM193 million comprising of construction, network construction and related projects, and sand mining operations. In addition, CESSB group has various projects currently being pursued which are mostly under bilateral or direct negotiations with construction and network construction project owners amounting to estimated RM1.67 billion. These confirmed order book and projects that are being pursued are expected to generate earnings for the group in the next few financial years up to 2027.
Meanwhile, Citaglobal has an existing order book of RM539 million as of March 31, 2022. Coupled with CESSB group’s order book of RM193 million, Citaglobal will have a total order book of RM732 million.
Upon issuance of the consideration shares, Tiza Global’s shareholdings in the company will increase from nil to more than 33%. As a consequence, Tiza Global and its persons acting in concert (PAC) will be obligated to extend a mandatory offer to acquire all the remaining securities in Citaglobal not already owned by TIZA Global and its PAC.
“Over the next few years, one of the biggest drivers for Citaglobal will be Malaysia’s 5G network rollout. Once the group completes the proposed acquisition, it will be on track to benefiting from the development of 5G telecommunication towers across the country as CESSB is a licensed network facilities provider,” said Norza.
The proposed acquisition is expected to be completed by Q3’22, whereas the proposed share consolidation is expected to be completed by Q4’22.
