Priceworth
KUALA LUMPUR: Priceworth International Bhd
(PWI) is poised to transform into a top five timber player by taking over a 100-year concession to harvest and replant 101,161ha in Trus Madi Forest Reserve in Sabah for RM260mil.
In a filing with Bursa Malaysia, the wood product manufacturer and log trader said this would allow it to extract logs and timber on 1,759.8ha and other areas within the reserve that are covered under new coupe permits to be issued.
PWI’s wholly-owned subsidiary GSR Pte Ltd inked an agreement with Transkripsi Pintar Sdn Bhd on Wednesday to acquire 100% in Rumpun Capaian Sdn Bhd, which was awarded the 100-year concession for the area called Forest Management Unit 5 (FMU5) in September 1997.
FMU5 ranks among the top 10 forest management units in Sabah by acreage, according to PWI.
At the same time, another unit of PWI, Sinora Sdn Bhd, entered into a log extraction and timber sale agreement with Rumpun’s 99.99% subsidiary, Anika Desiran Sdn Bhd, to extract all commercial logs and/or merchantable timber.
GSR will acquire Sinora at net asset value and apply for a public listing on the Singapore Securities Trading Ltd (SGX) in the second half of 2017.
“The acquisition (of logging and replanting rights over 101,161ha in Sabah) is a game changer, as Priceworth currently uses only 40% of its capacity due to a shortage of sustainable log supply,” PWI said in a press statement.
“This acquisition will allow it to push its utilisation to 90% of its capacity. Furthermore, it will make Priceworth the only integrated timber company in Sabah and among the top five in the country.”
PWI said the funding for the RM260mil consideration would be sourced from proceeds arising from GSR’s listing as well as from a proposed private placement of up to 64.2 million new shares, a proposed special issue of up to 141.2 million new shares, and cash from internally-generated funds and/or bank borrowings (where necessary).
PWI is also proposing a renounceable two-call rights issue involving the issuance of up to 1.695 billion rights shares at an issue price of 10 sen together with a bonus issue of up to 847.484 million shares to be credited as fully paid-up, This is on the basis of two rights shares and a bonus share for every existing PWI share held.
The rights issue, to be completed by the first half of 2017, is expected to raise RM84.75mil in gross proceeds, which will mostly be used to repay bank borrowings.
Entitled PWI shareholders need only to pay 5 sen per rights share. The first call price of 5 sen will be payable in cash while the second call of 5 sen will be capitalised from the company’s share premium account and capital redemption reserve account.
PWI said it had procured its major shareholder, PWI founder and managing director Lim Nyuk Foh (who holds 11.16% equity interest), a written irrevocable undertakings to subscribe or procure the subscription of his respective entitlement in full to the rights shares as at the entitlement date.
On the rationale for the proposed takeover of Rumpun Capaian, PWI said it was an opportunity to transform the PWI group from one with a profit after tax of about RM1.4mil (based on the latest unaudited statements of comprehensive income for the financial year ended June 30, 2016) to a “significantly more profitable financial position”.
It said the transaction would also enable PWI to strategically create value within the group by combining the FMU5 forest management unit with its existing plywood manufacturing operations for a monetisation exercise of the same via the proposed listing of GSR.
“Consequently, the proceeds from the proposed listing of GSR will enable PWI to satisfy the consideration for the proposed acquisition without the need to incur additional interest bearing borrowings,” the company said.
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