By Doreenn Leong
INVESTORS normally frown upon deals involving private assets of major shareholders of listed companies as there are concerns on whether the asset will be beneficial to the listed company as well as the valuations used to determine the price.
Earlier in February, Eversendai Corp Bhd founder Tan Sri AK Nathan Elumalay proposed the listed co take over a 100% stake in his private liftboat business. Eversendai shareholders agreed to the exercise in March although the final purchase price has yet to be determined. The execution of the definitive agreement has been deferred for the second time from March 31 to April 30.
While the buyer and seller work out the final price for the deal, another listed company Wong Engineering Corp Bhd (WEC) is also planning to buy stakes in its owner’s private business as this will enable the company to diversify its business into real estate development.
WEC, established in October 1982, manufactures high-precision component parts in Malaysia. It provides product design, development and manufacturing services to the oil and gas, aerospace, telecommunications, test instrument, automotive and medical devices industries.
On April 2, WEC announced its proposal to invest some RM15.75 mil in its major shareholder Ong Yoong Nyock’s private business, Broadway Lifestyle Sdn Bhd (BLSB). Ong Yoong Nyock and his spouse Yong Kwee Lian are currently the major shareholder of WEC via TNTT Realty Sdn Bhd.
WEC said it is subscribing for 875,000 BLSB shares representing 35% of the enlarged share capital in BLSB of RM875,000 and up to 14.87 million redeemable non-cumulative preference shares or RM14.87 mil. These will be satisfied entirely in cash.
The other parties subscribing to shares in BLSB are Harn Len Corp Bhd and Tan Woon Chay.
Currently, Yoong Nyock and his son Wei Kuan hold a 50% stake each in BLSB, which was incorporated on Feb 8, 2013 with a paid-up capital of RM2.
Yoong Nyock, who made an unconditional mandatory takeover offer for WEC in 2016 via TNTT Realty, is also the founder and managing director of Tiong Nam Logistics Holdings Bhd. WEC CEO Yong Loy Huat is the brother-in-law of Yoong Nyock.
Based on the audited numbers, BLSB is a loss-making company with a net loss of RM3,589 and no revenue for the financial year ended June 30, 2019. It has not commenced any business operations since its incorporation. As such, there was no revenue recorded throughout the past three financial years.
It has an accumulated loss of RM29,121 as at June 30, 2019. Its total liabilities of RM126,780 exceeded its total assets of RM101,248 as at June 30, 2018. Based on these numbers alone, it will be interesting to know how the price tag was derived for the stake in BLSB.
However, the company said the RM15.75 mil was arrived at after taking into consideration the land consideration. It pointed out that based on the market value of the land of RM89 mil, the acquisition price of RM87.83 mil represents a discount of about 1.31%.
“These two in-laws have always talked of buying land and doing projects together. So, it’s not unusual for them to go into this deal. Even on the private side, they do have projects together. It is also planned that this listed company will not only do manufacturing business,” says a source familiar with the company.
Upon completion of the exercise, Yoong Nyock will own a 52.7% stake in BLSB, while WEC will own a 35% stake. Meanwhile, Harn Len will have a 10% interest in BLSB, whereas the remaining 2.3% stake will be held by Tan.
According to WEC, the reason for the share subscription in BLSB is to complete a land purchase by BLSB in Dengkil. Essentially, it is a rescue plan of BLSB by WEC as the former could not pay for the land meant for development.
On Oct 21, 2019, BLSB entered into a conditional sale and purchase agreement with Permata Realty Sdn Bhd to buy a piece of leasehold industrial land for RM87.82 mil.
However, on March 10, the SPA became unconditional. BLSB intends to finance the land consideration through a combination of RM70.26 mil in bank borrowings and RM7.57 mil in cash.
The company is currently in the midst of procuring credit facilities and WEC will not be required to provide any corporate guarantee to BLSB.
According to WEC, BLSB intends to develop industrial factories and warehouses on the site, but said plans were still preliminary at this juncture.
The land is located off Jalan Dengkil-Banting, which is about 44km south of Kuala Lumpur City Centre (Dayabumi Post Office) and 14.9km southwest of Cyberjaya Town Centre (Cyberjaya Post Office).
According to Majlis Perbandaran Sepang Local Plan 2025, 12 areas have been zoned as industrial parks with a total area of 3,530 acres in Sepang.
Currently, there are three main industrial parks development. One is the Serenia Industrial Park, with a focus on logistics carriers and e-fulfilment, e-commerce, automotive and other manufacturing industries.
The Tanjung Industrial Park focuses on heavy and high-tech industry while the KLIA Industry Park focuses on aerospace, automotive, cargo and high-tech industry. — April 3, 2020
