Spotlight on 3-in-1 merger

Temasek Formation looking for commodity acquisitions post merger

KUALA LUMPUR: Over the week, it was the 3-in-1 merger of Jotech Holdings Bhd, AIC Corp Bhd and AutoV Corp Bhd which hogged the news.

Temasek Formation Sdn Bhd, the vehicle of Datuk Goh Tian Chuan, is proposing to acquire the entire business and undertakings, including all assets and liabilities of these three companies, for RM696mil to be satisfied via the issuance of new Temasek Formation shares. (Temasek Formation has no relation with the Singapore Government's investment arm.)

Goh is presently executive chairman of Jotech and AIC and Nakamichi Corp Bhd and has stakes in all three listed companies involved in the merger. Goh's entry into the corporate world is interesting as he comes from law enforcement. Between 1982 and 1994, he was a senior police officer in the Special Branch division based in Sabah. In 1995, he left the police force to join Everise Ventures Sdn Bhd, a subsidiary of Repco Holdings Bhd in October 1995.

In Sabah, Repco Holdings was involved in gaming, timber and media. Everise was the management company for the Sandakan Turf Club. While Repco Holdings' Sabah divisions were doing well, its autoparts business in Peninsular Malaysia was making huge losses. In 1999, Repco Holdings collapsed and Danaharta Bhd came in to restructure the company. In September 2004, Goh was appointed by Danaharta as non-executive and non independent director of Repco Holdings.

Subsequently, Goh, together with the Sandakan Turf Club, acquired Everise Ventures from Danaharta. In 2004, Goh teamed up with business partner Datuk Lo Fui Ming (also from Sabah) to run Cepatwawasan Group Bhd. Goh held positions of chief executive officer and executive chairman in the company.

In 2006, Goh bought into AIC, acquiring the shares of the company's three main shareholders. At that time, AIC was the holding company for Jotech and associate company of AV Ventures Bhd (now AutoV). Goh then proceeded to hive off non-core businesses such as electronics and display, and diversified into resources and plantations. In 2006, all the companies had a total debt of some RM140mil.

As of end March 2011, the total borrowings of all three companies was brought down to RM78.8 mil, with the majority of this from Jotech. AIC's gearing is less than 0.2 times (x), Jotech's is 0.3x, while AutoV is free of debt. Jotech's main business is precision stamping but has since ventured into mining and oil palm plantations, albeit in a small way. Two years ago, it bought a 40% stake in British Virgin Island-based Rockhill Resources Ltd for US$2mil. Last November, it bought two private palm oil companies, Malgreen Progress Sdn Bhd and Cergas Fortune Sdn Bhd, for RM28.3mil. While the plantation size is only 2,000 acres, it is already profitable and contributing to bottomline.

To be noted is that in the last two years, all three companies - AIC, Jotech and AutoV, have turned profitable. However, due to accumulated losses of the past, AIC and Jotech are still unable to pay dividends. “Inter-related structures are never good for shareholders. That was when I started to think of this merger, and I felt that the plan was workable,” said Goh.

At the offer price of RM696mil, there will be an incremental market capitalisation of RM149mil to be created post merger. To be noted though is that this merger exercise is based entirely on share swaps, with the shareholders of all three companies being offered shares in the newco. The newco, Temasek Formation, will absorb all the businesses of the three companies and assume the listing status of one of the three.

The core business of Temasek Formation will be integrated manufacturing and commodity and resources.

“We are proposing this merger for a better future. A bigger size will enable us to improve our balance sheet position, give us better financial strength and to streamline our businesses to realise the full potential of the respective business segments,” said Goh. “Post merger, we will be looking to acquire new businesses in the commodity and resources space. Manufacturing is our core business, and presently contributes the bulk of our revenues. Eventually, we want the contribution from commodities to balance out the contribution from manufacturing,” said Goh.

Goh presently owns a 7.6% stake in Jotech, a 25.2% in AIC and a 0.4% stake in AutoV. Post exercise, Goh will have a 20% stake in the company. There will need to be a 75% approval from the shareholders of Jotech, AIC and AutoV before this deal can go through. This exercise is expected to be completed by the first quarter of next year. Based on 2010 figures, all three companies will have a combined net profit of RM35.17mil on the back of RM399.8mil in revenue. Its combined asset size is RM432mil.

Currently, AIC is the most profitable company, with profits of RM15.95mil for its financial year ended Dec 31, 2010, followed by AutoV with RM11.99mil and Jotech with RM7.23mil over that same period. The management of all three companies will not change post merger.

ini 3 tak ada power.....

waste my time [You must be registered and logged in to see this image.]

phoenix wrote:ini 3 tak ada power.....

waste my time [You must be registered and logged in to see this image.]

Poor response and the market gives

phoenix wrote:ini 3 tak ada power.....

waste my time [You must be registered and logged in to see this image.]

tis morn i went 4 aic cos its d only 1 less volatile of d 3 ... i was supposed 2 sell 1.57 but 4got 2 change my prc when it started showing sign of weakening else i will b another rm100 richer ...

hlk wrote:

phoenix wrote:ini 3 tak ada power.....

waste my time [You must be registered and logged in to see this image.]

tis morn i went 4 aic cos its d only 1 less volatile of d 3 ... i was supposed 2 sell 1.57 but 4got 2 change my prc when it started showing sign of weakening else i will b another rm100 richer ...

You will make it up tomorrow
this is painful

thk wrote:

hlk wrote:

phoenix wrote:ini 3 tak ada power.....

waste my time [You must be registered and logged in to see this image.]

tis morn i went 4 aic cos its d only 1 less volatile of d 3 ... i was supposed 2 sell 1.57 but 4got 2 change my prc when it started showing sign of weakening else i will b another rm100 richer ...

You will make it up tomorrow
this is painful

i bot tis morn at d bell 100lot 1.55 sold 1.56 got rm100 instead of 1.57 rm200...