KUALA LUMPUR (Oct 2): Datuk Ding Seng Huat, the group managing director (MD) of D.B.E. Gurney Resources Bhd, is buying a 51% controlling stake in six wholly-owned subsidiaries of DBE for a combined RM32.58 million cash.

The units are D.B.E. Poultry Sdn Bhd, D.B.E. Breeding Sdn Bhd, D.B.E. Hatchery Sdn Bhd, D.B.E. Marketing Sdn Bhd, D.B.E. Food Processing Industries Sdn Bhd and D.B.E. Gurney Chicken Sdn Bhd.

The RM32.58 million consideration comprises a disposal consideration of RM10.2 million and settlement of RM22.38 million owing from DBE Poultry to DBE. DBE said the group is expected to record a proforma gain of RM457,070, arising from the proposed disposal.

The proposed disposal is deemed a related party transaction as Ding is the group MD and shareholder of DBE, with a 4.89% stake as at April 1, 2019.

In a bourse filing today, DBE said the board, however, has been notified of Ding's intention to relinquish his position as the group
MD upon completion of the proposed disposal to focus his efforts on managing the business activities of the six companies, moving forward.

The group has today entered into a conditional share sale agreement (SSA) with Ding for the proposed disposal.

Under the SSA, Ding has granted a put option to DBE to sell all or part of the remaining 49% stake in the six companies at a total exercise price of up to RM9.8 million. DBE has also granted a call option to Ding to acquire all or part of the option shares at the exercise price.

"If the put option and/or call option are fully exercised, DBE will no longer be involved in poultry-related businesses," DBE said.

Upon completion of the proposed disposal, the six companies will cease to be DBE’s subsidiaries and will become 49%-owned associates.

The six companies are currently dormant and were previously involved in poultry-related businesses which includes poultry breeding, hatchery, processing and sale of chickens and other food stuff, trading of related poultry farm products and operation of food and beverage outlets. As at Dec 31, 2018, the companies were in net liability position, solely due to impairment of its receivables from DBE Poultry of RM13.32 million provided during the year.

DBE intends to use RM22,000 or 67.53% of the RM32.58 million proceeds received from the proposed disposal for property development activities, and RM10,000 or 30.68% for working capital.

Meanwhile, revenue from its poultry segment has decreased in the past five years and the group has continued to record losses for the past 10 years except for the financial year ended Dec 31, 2016 (FY16), DBE noted.

In contrast to the poultry segment, the property development segment has been the sole profit contributor to the group, contributing a pre-tax profit of RM4.52 million for FY18 and RM4.39 million for the six months ended June 30, 2019.

Thus, the offer by Ding to acquire a stake in the poultry business of DBE is seen as an opportunity for the group to exit from its loss-making poultry business, stemming further potential losses to the group, as well as to refocus its resources to expand its property development business, DBE said.

Nevertheless, the proposed disposal is subject to approvals from shareholders at an extraordinary general meeting to be convened.

AmInvestment Bank Bhd has been appointed as the principal adviser for the proposed exercise, which is expected to be completed by the fourth quarter of the year.

DBE shares closed unchanged at 3 sen today with 100,000 shares done, bringing a market capitalisation of RM80.35 million.