Sarawak Cable on acquisition path

KUALA LUMPUR: Sarawak Cable Bhd is embarking on a series of acquisitions to strengthen its core businesses of steel fabrication and the installation and commissioning of transmission lines.

The company, which had asked for a suspension of trading for its stock on Aug 5 and 8, is looking to acquire one of its suppliers and increase its stake in a subsidiary. According to the announcement to Bursa Malaysia yesterday, Sarawak Cable is acquiring the remaining 25% stake it does not own in Sarwaja Timur Sdn Bhd for a purchase consideration of RM11.02 million, or RM2.12 per share. The purchase is to be satisfied via the issuance of 5.2 million new shares.

Sarawak Cable is also proposing to acquire a 65% stake in Trenergy Infrastructure Sdn Bhd for RM24.45 million to be satisfied through the issuance of 11.5 million new shares.

The group is acquiring the 25% stake in Sarwaja Timur from Austin Corp (M) Bhd, while the 65% stake in Trenergy will be from Austin and Sarawak Cable’s chairman Datuk Sri Mahmud Abu Bekir Taib.

Mahmud is the son of Sarawak Chief Minister Tan Sri Abdul Taib Mahmud. He is also deputy group chairman of Cahya Mata Sarawak Bhd.

If successful, Mahmud together with persons acting in concert (PACs) will indirectly and directly own 63.9 million shares, or a 42.11% stake, in Sarawak Cable. Given that it breaches the 33% threshold, Mahmud and his PACs would have to undertake a mandatory general offer for the remaining shares they do not hold. However, they are seeking an exemption from doing so from the Securities Commission.

Sarawak Cable acquired its existing 75% stake in Sarwaja Timur in October last year for RM28.9 million, or RM1.20 per share, for a mixture of shares and cash from major stakeholder, state energy provider Sarawak Energy Bhd and Syarikat SESCo Bhd.

According to Sarawak Cable’s latest annual report, Sarawak Energy holds a 21.56% stake, followed by Mahmud with a direct 19.35% stake and Leader Universal Holdings Bhd with 15.36%.

If successful, Sarawak Cable will see an increase in its share capital from RM67.5 million to RM75.9 million. Mahmud will see his direct shareholding increase to 22.5%, while Sarawak Energy’s direct stake will be diluted to 19.19%, and Leader’s stake will decline to 13.67%.

Privately-owned Austin is principally involved in the provision of project management services for the power transmission industry in Malaysia. Austin’s directors are Sivayogarajasingam Sivasubramaniam, Sivayogarajasingam Saumian and Nadarajah Sivapragasam. Saumian and Nadarajah each hold a 50% stake in the company.

Sarwaja Timur is principally involved in the manufacturing, fabrication, galvanising and sale of steel structures. Sarawak Cable cited the inclusion of contributions from its new subsidiary as the primary reason for its improved earnings shown for its 1QFY11 ended March 31. For 1QFY2011, the company saw its net profit increase to RM3.4 million compared with RM917,000 posted for the previous year’s corresponding quarter.

According to the statement on Bursa, Sarawak Cable’s rationale for buying the remaining 25% in Sarwaja Timur is to strengthen its equity interest in the company, while continuing a strategic alliance with Austin.

Trenergy is principally involved in the construction of power transmission lines and has sourced supplies before from Sarawak Cable.

“The proposed acquisition in Trenergy is a strategic move by the company to expand and complement its existing range of products and services in the power transmission and distribution industry from the supply and manufacture of power cables, wires and steel structures to the construction, installation and commissioning of power transmission and distribution lines by increasing its market presence and foothold in the power transmission industry,” said Sarawak Cable.