Boustead Heavy Industries Corporation Bhd (BHIC) has reached an agreement to dispose of its subsidiary, Lumut Naval Shipyard Sdn Bhd (LUNAS), to the Ministry of Finance (Inc) for RM1.
Today, BHIC issued a letter of agreement (LOA) to LUNAS, which LUNAS accepted, outlining the terms for entering into an intercompany trade receivables settlement agreement (ITRSA)."
The execution of the ITRSA, a prerequisite outlined in the share sale agreement (SSA), is contingent upon BHIC obtaining shareholder approval.
The proposed disposal entails selling 27,000,001 ordinary shares in LUNAS to Ocean Sunshine Bhd (OSB) for a nominal sum of RM1.00, representing approximately 20.77% of the equity interest in LUNAS held by BHIC's subsidiary, Perstim Industries Sdn Bhd (PISB).
This move follows BHIC's receipt of a letter from the Minister of Finance Incorporated (MOF Inc) expressing an intention to acquire 20.8% of BHIC's equity interest in LUNAS via OSB.
Simultaneously, BHIC has initiated an ITRSA with LUNAS to settle outstanding trade debts totaling approximately RM384.43 million.
Under the terms of the ITRSA, LUNAS will make a cash payment of RM49.7 million to BHIC, effectively settling the net trade debts owed by LUNAS to BHIC and its subsidiaries.
This agreement is contingent upon BHIC obtaining shareholder approval at an EGM.
The rationale behind these strategic manoeuvres is multifaceted.
Firstly, the proposed disposal and ITRSA aim to streamline BHIC's operations and organisational structure.
By divesting shares in LUNAS and settling outstanding debts, BHIC seeks to optimise its financial position and focus on core business activities.
Additionally, these actions align with the Malaysian government's objectives, particularly in ensuring the successful completion of the LCS project.
Furthermore, the introduction of OSB as a strategic shareholder in LUNAS is expected to bolster the company's capabilities in naval ship construction, repair, and maintenance, underscoring BHIC's commitment to enhancing the competitiveness and efficiency of its subsidiary's operations.
The utilisation of proceeds from these transactions is earmarked for various purposes, including the redemption of redeemable preference shares, working capital requirements, and covering expenses related to the proposals.
BHIC intends to allocate funds for the full redemption of redeemable preference shares issued to Boustead Holdings Bhd (BHB), its major shareholder, as part of a debt settlement arrangement.
AER, serving as the Independent adviser for the proposals, has deemed them to be in the best interest of the group, fair and reasonable, and not detrimental to the interest of the non-interested shareholders of the company.
Barring any unforeseen circumstances and subject to all relevant approvals being obtained, the Proposals are expected to be completed by the second quarter of 2024.
Malacca Securities has been appointed to act as the principal adviser for the proposals.