Advancecon Holdings Bhd intends to buy a 51% majority stake in quarry operator, Spring Energy Resources Bhd, worth RM30.4 million to expand its potential reach in earthworks and civil engineering services.
The company, which specializes in civil engineering services, explained that the stake will be purchased from Spring Energy Resources investment holding company, Fook Hua Holdings Sdn Bhd.
"Payment will be made through a cash payment of RM15.2 million as well as the issuance of 33 million new Advancecon shares to Fook Hua at an issue price of 46 sen per share," he said in a statement yesterday.
The firm explained the move would increase the number of ordinary shares issued by Advancecon to 448.8 million shares from 415.8 million shares at the time
this.
Bernama reported that when the purchase is completed, Fook Hua will hold 7.4% of Advancecon's enhanced shareholding base.
"The cash payment portion will be financed through internal funds and bank loans," he explained.
The proposed acquisition is expected to be completed in the third quarter of calendar year 2021 subject to Bursa Securities 'approval for the listing and quotation of new shares to be issued for Fook Hua as well as shareholders' approval during the next extraordinary general meeting.
Advancecon explained that with the purchase, the firm will be able to ensure an adequate supply of quarry products and machinery for its ongoing and future projects.
The potential reach of the earthworks and civil engineering services segment was also expanded by leveraging on Spring Energy Resources' distribution network in Negeri Sembilan, Selangor, Pahang and Perak.
According to Group Chief Executive Officer (CEO), Datuk Phum Ang Kia, efforts to integrate and streamline quarry operations will reduce operating costs.
"The move also strengthens our competitive advantage through increased assets and human capital resources, which will put us in a better position when engaging in large -scale project tenders as well as enhancing our competitiveness," he said.
He added that Spring Energy Resources will guarantee a total profit after tax of RM12 million for a financial period of 24 months during the financial year ended 31 December 2022 (FY22) and 2023 (FY23) with RM6.1 million per annum to Advancecon based on the equity interest to be purchased. .
