KUALA LUMPUR (May 14): Halex Holdings Bhd is buying Hextar Chemical Ltd (HCL) for RM596.79 million in shares and cash.

Hextar Holdings Sdn Bhd has inked a share sale agreement with Halex for the transaction and said the payment will be satisfied through a combination of cash amounting to RM17.9 million and the issuance of 714.68 million new ordinary shares in Halex at 81 sen each.

The proposed acquisition will be funded by internally generated funds, said Halex's Bursa Malaysia filing.

HCL is owned by Hextar Holdings Sdn Bhd, whose major shareholders are the directors of Halex.

Halex said the purchase consideration is reasonable, given that agreed price-to-earnings multiple (agreed PE multiple) falls within the range of PE multiples of the comparable companies as at Dec 5, 2017, the last market day prior to the signing of heads of agreement (HoA).

On top of that, agreed PE multiple also represents a discount of 17.32% to the simple average PE multiple of the comparable companies as at the last market day and is significantly below the PE multiple of Imaspro Corp Bhd, a direct competitor of Halex and HCL.

For FY17, HCL registered an audited consolidated profit after tax of RM43.4 million, implying an acquisition price-to-earnings multiple of 13.72 times.

"The agreed PE multiple was negotiated and agreed between Halex and HCL at the point of signing of the HoA," said Halex, adding that the board has considered the trading PE multiples of companies listed on main market of Bursa with principal activities which are broadly comparable to HCL's business.

In early December from last year, Halex said it will buy HCL for an indicative price of RM550 million, to allow the company and its subsidiaries to expand its agrochemical business by tapping into HCL's customer and supplier network in more than 30 countries worldwide.

Halex shares closed down 8 sen or 8.6% to 85 sen, bringing a market capitalisation of RM90.07 million.