THE reverse takeover (RTO) of Ancom Logistics Bhd (ALB) by S7 Holdings Sdn Bhd is a positive move for Ancom Bhd, making it part of a bigger group.
“Ancom was selling ALB’s assets to Nylex (Malaysia) Bhd, which would allow it to streamline its operations by making logistics in-house, and Ancom would be able to reduce its debt to Nylex at the same time,” said a source close to Ancom management.
Nylex made up 50% of ALB’s business, according to the source.
At the same time, after selling ALB’s assets, Ancom needed to find an asset to inject into ALB, as it would have become a shell company.
“S7 came with the offer to RTO for S5, one of its holdings of which it owns about 70%, and this was timely, saving Ancom the time looking for an asset to inject into ALB,” said the source.
It was also explained that, even after dilution, Ancom would own about 5% of S5 Holdings Inc, a frontrunner of the National Integrated Immigration System contract (NIIS) worth RM1.5 bil. This would also raise Ancom’s value from owning a stake “in a RM900 mil company, according to MyEG Services Bhd’s deal.” For context, MyEG had paid RM90 mil for a 10% stake in S5.
“ALB went from a break-even ACE Market counter to issuing at 10 sen at a 473 million share base, and is being sold at RM47 mil. Discounting the net asset per share of 5 sen, ALB is being sold at a 5 sen premium, for RM24 mil. This is a very good price for a shell,” said the source.
Although there were also concerns raised about political motivations behind the deal, the source pointed out that this was merely a matter of timing.
“The S5 deal is merely timely, and S5 is also looking to conclude an RTO quickly, having been delayed by the ConnectCounty Holdings Bhd attempt,” said the source, noting that the current deal with ALB was not the same as the verbal agreement between S5 and ConnectCounty, due to a heads of agreement having been signed.
“The tender for the NIIS is a bonus, and as a minority shareholder, we would view it as good news should it be awarded to S5,” said the source.
Bursa filings were made by both Ancom and MyEG, with suspensions of trading for both companies.
“ALB has entered into a Heads of Agreement with S7 Holdings Sdn Bhd, Merrington Assets Limited, MyEG Capital Sdn Bhd and Avocat Sdn Bhd,” said Ancom, according to the bourse filing dated July 16.
At the market’s noon close, Ancom’s shares were last done at 81 sen, up 4 sen, with 22.4 million shares traded. – July 16, 2020
