KUALA LUMPUR (March 10): LTKM Bhd has decided to tweak the series of corporate exercises it had proposed last year in order to exit the poultry and egg business and venture into electronic manufacturing services (EMS) via a reverse talkeover.

The first adjustment is an upward revised in the valuation of the six existing businesses, which will result in the disposal consideration rising to RM222 million from RM158.83 million, said LTKM in a bourse filing.

These chicken egg producing businesses are meant to be divested to LTKM’s executive chairman Datuk Tan Kok and his wife Datin Lim Hooi Tin, who collectively own a 70.2% stake in the group.

Despite the higher valuation, LTKM has decided to lower the special dividend and capital repayment rate to 90 sen per share or RM128.8 million in total, versus RM1.1098 per share or RM158.83 million previously.

The remaining RM93.2 million from the disposal consideration will be utilised to fund the unchanged RM336 million acquisition of EMS provider Local Assembly Sdn Bhd.

The acquisition of Local Assembly will similarly be settled via a RM100 million cash payment, and the remaining through the issuance of new shares, allowing the EMS provider’s current shareholders to gain a controlling stake in LTKM.

Local Assembly is currently 37.5%-owned by Chai Voon Sun, 22.5% by Gurmakh Singh Ajmer Singh, 15% by Wee Thian Song, 20% by Divine Inventions Sdn Bhd and 5% by Proven Venture Sdn Bhd.

Divine Inventions is controlled by Chin Hin Group Bhd founder and executive chairman Datuk Seri Chiau Beng Teik while Proven Venture is wholly-owned by Proven Venture Capital PLT, which is owned by over 100 partners consisting of high-net worth entities and individuals.

Previously, LTKM had proposed to fund the RM100 million cash portion in the acquisition of Local Assembly with a RM138 million new shares placement, whereby the remaining proceeds raised was to be used for working capital (RM30.5 million) and expenses expected to be incurred for the corporate exercise (RM7.5 million).

The exercise involves issuing 230 million new shares at a minimum issue price of 60 sen apiece, representing 33.1% of LTKM’s enlarged share capital.

Under the new adjustments, LTKM is proposing to raise a lower sum of RM82.26 million through placement of new shares, with only RM6.8 million utilised to pay for Local Assembly's acquisition, while a larger sum of RM68.85 million will be allocated for working capital and RM6.6 million for expenses related to this corporate exercise.

This part of the exercise has been revised to issuing 63.27 million new shares with a minimum issue price of RM1.30 apiece, representing 20% of LTKM’s enlarged share capital.

It is worth noting that under the newly revised terms, in order to take over LTKM’s chicken egg businesses, Tan and Lim will have to pay RM131.6 million cash after offsetting their dividend entitlement of RM90.4 million due to their shareholdings in the group.

This is much higher than the estimated RM40.14 million that the duo were required to pay under previous terms, whereby the price to take over the chicken egg businesses was RM158.83 million, while their dividend entitlement was RM118.69 million previously.

LTKM had proposed the original RTO exercise nearly in April 2022, and subsequently announced in December that it was reviewing the terms of the deal, citing “volatile market conditions".

In exchange, Tan and Lim will retain a higher stake in the listed entity — which is set to change its name to LA Technology Bhd — upon completion of the RTO.

Both of them are estimated to retain an ownership of about 15% under the revised terms, compared with about 7.7% previously.

Nonetheless, Tan and Lim have expressed their intention to eventually fully exit LTKM.

Shares of LTKM closed one sen or 0.7% lower at RM1.40 on Friday (March 10), giving the group a market capitalisation of RM200.36 million.

Read also:
https://www.theedgemarkets.com/article/ltkms-lengthy-reverse-takeover-de...