KUALA LUMPUR (Oct 6): LTKM Bhd's share price fell by as much as 17.24% or 25 sen to RM1.20 in Friday morning trade, after the chicken egg producer announced a day earlier that a RM336 million deal to acquire an electronic manufacturing services (EMS) company was mutually terminated with the vendor.
At market close, the counter settled at RM1.30, down 15 sen or 10.34% from its last closing price of RM1.45 on Thursday, for a market capitalisation of RM186.05 million. It was Bursa Malaysia's sixth biggest loser.
The counter was also heavily traded, with 2.04 million shares changing hands.
The steep fall in LTKM's share price prompted Bursa Malaysia to suspend intraday short selling of its shares on Friday.
Year to date, the stock had declined by 10%.
In a filing on Thursday, LTKM said multiple proposals, which essentially aimed to replace its egg-laying core business with EMS, were called off.
"Subsequent to the execution of the latest supplemental letter agreement dated May 10, 2023, both parties have experienced contrasting financial performance.
"Although its projects are still ongoing, Local Assembly Sdn Bhd is facing unforeseen delays in their implementation by its major customers, while LTKM has returned to profitability from the egg subsidy by the government since the inception of the proposals. As such, both parties concluded that it is mutually beneficial to terminate the proposed acquisition, and to respectively pursue any future strategies of their own.
"As the proposed acquisition is inter-conditional with the other components of the proposals, they are therefore concurrently aborted. As such, on Oct 5, 2023, LTKM and LTKSB (Ladang Ternakan Kelang Sdn Bhd) also entered into termination letter agreements to mutually record the termination of the proposed disposals in accordance with the terms of the disposal SPAs (sale and purchase agreements).
"Other than professional fees incurred for the proposals, the termination of the proposals is not expected to have a material adverse impact on LTKM."
The proposals included the acquisition of 100% equity interest in Local Assembly for RM336 million, to be satisfied via RM100 million cash and the issuance of 393.33 million LTKM shares at 60 sen apiece, as well as the sale of its existing business to LTKSB for a total cash disposal consideration of RM158.83 million, among others.
In addition, LTKM would also undertake a restricted issue of 230 million new shares, representing 33.1% of the enlarged share capital of LTKM, to investors to be identified later.
Upon the conclusion of the share sale and restricted issuance, share vendors of Local Assembly would become major shareholders of LTKM with a combined 56.6% stake, while Local Assembly itself would become a wholly owned subsidiary of the listed entity.
It was reported in April 2022 that Chin Hin Group Bhd executive chairman Datuk Seri Chiau Beng Teik is an indirect shareholder of Local Assembly, thanks to his interest in Divine Inventions Sdn Bhd, which holds a 20% stake in the company. Divine Inventions is wholly owned by PP CH Realty, in which Chiau has a 55% stake.
Under the proposed acquisition, the vendors had also provided a profit guarantee for Local Assembly of a minimum profit after tax (PAT) of RM28 million for the financial year ended Dec 31, 2022 (FY2022), or not less than an aggregate of RM50 million in PAT for FY2022-23.
When the deal was first announced in April 2022, LTKM said it would seek an exemption for Local Assembly's shareholders to mandatorily make a takeover offer for shares they do not already own.
Meanwhile, LTKM had proposed to undertake a proposed special dividend cum capital repayment of RM1.11 per share on an entitlement date to be determined and announced at a later date, and consolidate two existing LTKM shares into one LTKM share after the proposed special dividend cum capital repayment.