Opcom to buy 40% stake in Unigel UK for US$3.67mil
By Goh Thean Eu July 31, 2014
- Opcom Niaga, Hikari Capital and UTC sign conditional agreement to buy stake
- UTC believed to be controlled by Opcom cofounder Chhoa Kwang Hua
FIBRE optics cable manufacturer Opcom Holdings Bhd plans to buy a 40% stake in Unigel (UK) Ltd, a producer of thixotropic gel, for US$3.67 million in cash.
The proposed acquisition is expected to help Opcom in a few ways. For one, it allows the company to secure a consistent supply of thixotropic gel, a key component in the production of Opcom’s fibre optic cables.
“Furthermore, future plans on product collaborations and exchange of technical know-how between Opcom and Unigel is expected to improve the production process and quality of fibre optic cables produced by Opcom,” it said in its filing to Bursa Malaysia yesterday (July 30).
“The proposed acquisition is expected to contribute positively to the future performance of Opcom,” it added.
The acquisition also provides a partial hedge against future price increases of thixotropic gel, the company said.
Opcom, which has been sourcing thixotropic gel from Unigel UK for the past 10 years, said that using alternative gel may result in the failure of its cables.
“It may also result in claims against Opcom which would have an adverse impact on the operations and financial performance of Opcom, in addition to the damage in reputation of Opcom’s fibre optics cables,” the company said.
On July 26, Opcom Niaga Sdn Bhd, Hikari Capital Ltd and Unigel Technologies Ltd (UTL) signed a conditional share purchase agreement with Unigel UK, together with several individuals: Gary Steven Robinson, Richard Barrie George, Ian Charles Hatchell, Mukhtiar Singh Sohal and Richard Michael Rund, for the acquisition of the entire stake in Unigel UK, comprising one million Unigel UK shares.
The conditional share sale agreement came slightly more than three months after all the related parties signed the heads of agreement – which expressed Opcom’s interest to acquire the 40% stake in Unigel UK.
From the one million shares, 400,000 will be acquired by Opcom Niaga, while the remaining 600,000 shares will be acquired by UTL. Opcom Niaga is a wholly-owned subsidiary of Opcom Holdings, while UTL is a wholly-owned subsidiary of Hikari.
The acquisition will be paid for in three tranches. The first tranche, comprising US$2.55 million, will be paid when the deal is completed. The second tranche of US$520,000 will be released when Unigel Uk achieves a pretax profit of at least US$1.19 million for the first 12 months after the deal is completed.
The third tranche of US$600,000 will be paid when it achieves US$1.99 million pretax profit in the following year.
The proposed acquisition is pending approval from Opcom shareholders, which will be sought at an extraordinary general meeting to be convened later.
Kedah Mentri Besar (Chief Minister) Mukhriz Mahathir (pic), whose father is former prime minister Dr Mahathir Mohamad, has a 23.5% direct stake in Opcom, while his wife Norzieta Zakaria has a 26.9% indirect stake.
The company was incorporated in 1994, cofounded by Mukhriz and Chhoa Kwang Hua. The current chairmanship is held by Mokhzani Mahathir, also a son of Dr Mahathir.
Bursa Malaysia filings also revealed that Chhoa, who has a 1.69% direct stake in Opcom, is the sole director of UTL.
The proposed acquisition comes at a time when demand for fixed-line broadband services, in terms of both access and bandwidth, is on the rise.
“In light of the increasing broadband penetration and the quest for ever faster broadband speed throughout the world, telecommunication companies and governments in both advanced and emerging markets have been the main thrusts for major investment in improving and expanding broadband infrastructure, Opcom said in its filing with the stock exchange.
“As manufacturers all around the globe increase production of fibre optic cables to meet the increasing demand from both public and private customers, Unigel UK is anticipated to ride the uptrend in production of fibre optics cables through the increased demand for its cable filing and flooding compound,” it said.
Meanwhile, in the same filing to Bursa Malaysia, Opcom also proposed a bonus issue of 32.25 million new ordinary shares on the basis of one bonus share for every four existing Opcom shares held on an entitlement date to be determined later.
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