YTL Cement buying 51% of Lafarge Malaysia for RM1.64b, to make MTO for rest of shares

PETALING JAYA: YTL Corp Bhd is acquiring 51% equity interest in Lafarge Bhd from Associated International Cement Ltd (AICL) for RM1.63 billion cash or RM3.75 per share.

Trading in both securities was suspended for an hour from 2.30pm today. At market close, Lafarge’s soared 42 sen or 12.7% to RM3.72 on 16.94 million shares done, while YTL gained 5 sen or 4.4% to RM1.18 with 2.87 million shares changing hands.

The purchase consideration of RM3.75 per share represents a premium of 19.05%, 32.04% and 47.06% to the five-day, one-month and three-month volume weighted average market price of Lafarge Malaysia’s shares up to and including April 30, 2019 of RM3.15, RM2.84 and RM2.55 respectively.

It also represents a price-to-book ratio of about 1.25 times based on the audited net assets per Lafarge Malaysia share as at Dec 31, 2018 of about RM3.

In a filing with Bursa Malaysia, YTL Corp said its subsidiary YTL Cement Bhd has entered into a sale and purchase of shares agreement with AICL for the proposed acquisition.

Upon completion of the acquisition, YTL Cement will be obliged to extend a proposed mandatory takeover offer (MTO) for all the remaining shares, which it proposes to acquire at a cash offer price of RM3.75 per share.

“The proposed acquisition represents an opportunity for YTL Cement and its subsidiaries to pursue its expansion strategy. Lafarge Malaysia is a strategic fit to the YTL Cement group’s cement business and is expected to complement the group’s existing core business activities,” it said.

It expects the proposed acquisition to deliver synergies including operational efficiencies in logistics, distribution and procurement, as well as cost synergies realised from of scale, the reduction or elimination of duplicated functions and the consolidation of corporate overheads.

It said that the realisation of the synergies is in line with the group’s continued efforts to improve operational efficiencies and manage its operating and production costs, and is expected to contribute positively to the future earnings and cash flows of the enlarged YTL Cement group.

The proposed acquisition will also enable the group to expand its production capacity by gaining access to the existing plants and facilities of the Lafarge Malaysia group.

Upon completion of the proposed acquisition, Lafarge Malaysia will become a subsidiary of YTL Cement.

Note that the Lafarge Malaysia group registered a drop in revenue for the financial years ending Dec 31, 2014, 2016, 2017 and 2018. The group also suffered declines in net profit for three years (FY14, FY15 and FY16) and net losses of RM213.6 million and RM318.9 million for FY17 and FY18 respectively.

Despite Lafarge Malaysia’s dismal results, YTL Cement said it has taken into consideration the potential synergies and prospects of Lafarge Malaysia and believes that the proposed acquisition and MO would contribute positively to the future earnings and shareholders’ value of YTL Cement group in the long term.

YTL Cement intends to maintain the listing status of Lafarge Malaysia on the Main Market of Bursa Malaysia unless it receives valid acceptances resulting in YTL Cement and its associates holding in aggregate 90% or more of Lafarge Malaysia shares and Lafarge Malaysia does not comply with the public shareholding spread requirements.

The total consideration for the proposals will be funded via a combination of internally generated funds and bank borrowings.

Source: The Sun Daily

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