KUALA LUMPUR: SCGM Bhd has entered into a conditional share sale agreement (SSA) with Mitsui & Co Ltd and FP Corporation (FPCO) to dispose of its entire 100% stake in Lee Soon Seng Plastic Industries (LSSPI) for RM544.38mil cash.

       The food packaging manufacturer, in a filing with Bursa Malaysia, said LSSPI is the sole subsidiary of SCGM and represented the entire core business of the group.

       Upon completion of the proposed disposal, SCGM will not have any core business, subsidiary or associated company.

       “The proposed disposal entails Mitsui acquiring a 60% equity interest or 63.87 million LSSPI Shares for a cash consideration of RM326.63mil, and FPCO acquiring the remaining 40% equity interest or 42.58 million LSSPI Shares for a cash consideration of RM217.75mil,” SCGM said.

       Upon completion of the proposed disposal, the board of SCGM proposes to distribute part of the disposal consideration to all entitled shareholders of SCGM, through a proposed capital reduction and repayment exercise, as well as a proposed special dividend.

       “This is an opportunity for SCGM to unlock the value of our investment in LSSPI over the past 38 years. At the same time, it allows shareholders to partially realise their investments in the company in cash, as SCGM intends to distribute part of the proceeds to all entitled shareholders,” managing director Datuk Seri Lee Hock Chai said in a statement.

       SCGM is expected to record a net gain of disposal of approximately RM393.69mil after accounting for estimated expenses for the proposed disposal.

       The disposal consideration represents an implied enterprise value EV/Ebitda of approximately 10.60 times based on RM55.48mil Ebitda for the financial year ended April 30, 2021 (FY2021) of LSSPI; and an implied price to earnings ratio of 16.03 times based on FYE21 profit after tax of approximately RM33.95mil.

       In addition, LSSPI also entered into a conditional sale and purchase agreement with SCGM for the transfer of three contiguous parcels of land with factory buildings and other ancillary buildings located at Kulai, Johor for RM18.8mil cash.

       Of the proposed proceeds of RM544.38mil, SCGM said RM425.56mil are earmarked for proposed distribution to entitled SCGM shareholders within nine months, and RM18.8mil for transfer of properties immediately upon completion of the proposed disposal to the purchasers.

       It added that RM84mil has been allocated for the acquisition of new business/assets to be identified or working capital within 24 months, and the balance RM16mil to defray estimated expenses for the exercise.

       For illustration purposes, the proposed distribution entails capital reduction and repayment of 36 sen per share, and a proposed special dividend of RM1.85 per share.

       SCGM said the proposed disposal of LSSPI is subject to approvals by at least 75% of the total number of issued shares held by SCGM shareholders at an extraordinary general meeting to be convened, and any other relevant authorities and/or parties if required.

       However, the transfer of properties does not require approval by SCGM shareholders.

       Barring unforeseen circumstances, both exercises are expected to be completed by the third quarter of 2022.