Hextar Global to diversify into cleaning chemicals business via acquisitions
08 Mar 2021
KUALA LUMPUR (March 8): Agrochemical company Hextar Global Bhd is diversifying its business to include manufacturing and distribution of specialty cleaning chemicals products such as latex polymers, coagulants, detergents, degreasers and chlorine sanitisers via the acquisition of Chempro Group.
Hextar is acquiring three companies under Chempro Group, namely Chempro Technology (M) Sdn Bhd, Protek Chemicals & Engineering (B) Sdn Bhd and a stand-alone company, Alpha Aim (M) Sdn Bhd, for a combined RM138 million cash.
In a bourse filing, Hextar said it today entered into a conditional share sale agreement (SSA) to acquire Alpha Aim from Tan Seio Beng and Chan Kwei Ling, as well as Chempro Technology from Tan, Cheok Viping and Wetacho (M) Sdn Bhd.
Upon completion of the proposed acquisitions, Alpha Aim and Chempro Technology will be wholly-owned subsidiaries of Hextar.
Hextar said the proposed acquisitions will be the right opportunity for it to tap into the growing specialty cleaning chemicals industry and further strengthen the group’s foothold in the chemicals industry. The proposed diversification is also in line with the strategy and expansion plans of the group’s management, it added.
In a separate statement, Hextar executive director Datuk Eddie Ong Choo Meng noted that the proposed acquisitions come with a profit guarantee of RM39 million over three years, which translates into a net profit of RM13 million for each consecutive year from the financial year ending Dec 31, 2021 to 2023.
“As a result, this will create additional sources of income for the group and hence further strengthen the group’s financial performance and financial position which in turn create value for the shareholders of Hextar,” he said.
“Although they (Chempro Group) are manufacturing a different type of chemicals as compared to our existing core business, we expect these businesses to command strong margins and further strengthen our foothold in the chemicals industry and we think it is the right path to go,” he added.
The purchase price represents a price to earnings multiple of 10.62 times, based on the profit guarantee.
Hextar said the proposed acquisitions will be funded via internal funds and/or bank borrowings.
“Upon completion of the SSA, the board anticipates that the proposed acquisitions may potentially contribute to 25% or more of the group’s net profit and/or result in a diversion of more than 25% of the group’s net assets,” it added.
Barring any unforeseen circumstances, the exercise is expected to be completed by the second quarter of 2021.
“Hextar is moving full steam ahead with its aggressive strategy of growth and diversification through acquisitions. We continuously look into other investment opportunities that can provide the furtherance to what we have already achieved. We are confident these acquisitions will strengthen the group’s growth profile and bring greater long-term value to our stakeholders,” said Ong.
At 2.50pm, shares in Hextar were down 10 sen or 7.3% to RM1.27, for a market capitalisation of RM1.04 billion. A total of 13.15 million shares were done.
Source: The Edge Markets