Builder Siab Holdings plans to raise RM110m via rights issue to fund Taghill acquisition

• Siab said as both the group and Taghill are currently involved in the building construction services, the proposed acquisition will enable both companies to leverage their combined strengths and expertise in the construction industry, as well as respective business relationships with various industry stakeholders.

KUALA LUMPUR (July 18): Builder Siab Holdings Bhd is acquiring Taghill Projects Sdn Bhd for RM122 million to be fully satisfied via a combination of RM96 million cash and RM26 million via issuance of Siab shares at an issue price of 13 sen each. Taghill is also a construction company, but is currently serving different clients from Siab.

Siab also plans to undertake a rights issue to raise up to RM110.34 million, of which RM96 million will be used to partly fund the cash consideration of the proposed acquisition and the rest for working capital.

Siab said as both the group and Taghill are currently involved in the building construction services, the proposed acquisition will enable both companies to leverage their combined strengths and expertise in the construction industry, as well as respective business relationships with various industry stakeholders.

"Siab and Taghill are currently serving different clients and as such, the combined strengths are expected to accelerate the group’s expansion plan and accrue the enlarged group with a continuous growth to emerge as a key player in the construction industry in Malaysia," it added.

Siab’s and Taghill’s current unbilled order book stand at RM280.53 million and RM1.43 billion, respectively.

In a bourse filing on Tuesday (July 18), ACE Market-listed Siab said it had entered into a share sale agreement with the vendors, namely Taghill managing director Wong Yih Ming, deputy managing director Chu Yee Hong and executive director Yap Kek Siung, for the proposed acquisition of Taghill.

The issue price of 13 sen was arrived at based on a discount of 2.62% to the five-day volume weighted average market price (VWAMP) of Siab shares up to July 17 of 13.35 sen.

To mitigate any potential losses or uncertainties associated with the proposed acquisition, the vendors have jointly agreed to provide a profit guarantee of consolidated net profit of not less than RM24 million for the financial years ending Dec 31, 2024 and 2025 (FY2024 and FY2025) on a cumulative basis.

"The achievement of the profit guarantee by Taghill is expected to improve the consolidated profit post-acquisition, given that Siab registered a net loss of RM19.27 million for the financial year ended Dec 31, 2022 (FY2022) whereas Taghill recorded a net profit of RM4.37 million in FY2022.

"The board is of the view that the purchase consideration and profit guarantee are reasonable, taking into consideration the historical performance and future prospects of Taghill as well as the existing projects and orderbook of the company," said Siab.

Meanwhile, its rights issue will entail the issuance of 919.51 million rights shares together with 459.76 million warrants on the basis of four rights shares for every three existing Siab shares held on an entitlement date to be determined later, together with one warrant for every two rights shares subscribed. This is based on the group's enlarged issued share capital of RM98.34 million comprising 689.63 million shares.

The issue price of the rights shares has been fixed at 12 sen each, a discount of 4.61% to the theoretical ex-rights price of Siab shares of 12.58 sen based on the five-day VWAMP of Siab shares up to July 17 of 13.35 sen. The proposed rights issue with warrants will raise gross proceeds of up to RM110.34 million. At the same time, the exercise of all the warrants will raise proceeds of RM91.95 million.

M&A Securities Sdn Bhd and Eco Asia Capital Advisory Sdn Bhd have been appointed as the principal adviser, and the financial adviser and independent valuer, for the proposals respectively.

Barring any unforeseen circumstances, the proposals are expected to be completed by the fourth quarter of 2023.

Siab shares closed unchanged at 13.5 sen on Tuesday, giving it a market capitalisation of RM63.74 million. The stock's price has fallen 15.62% year to date.