Lay Hong to acquire remaining 50% stake in Sri Tawau Farming

by S BIRRUNTHA / pic credit: ANNUAL REPORT

LAY Hong Bhd has entered into a conditional share sale agreement with Innofarm Sdn Bhd and Mackan Holding Sdn Bhd to acquire the remaining 50% equity interest in Sri Tawau Farming Sdn Bhd for RM28 million consideration.

The integrated poultry farmer said the purchase consideration would be settled via new ordinary shares issuance in Lay Hong to Mackan, subject to the terms of the agreement, according to a bourse filing yesterday.

The group would issue 80,000,000 new ordinary shares to Mackan at 35 sen a unit.

It added that Sri Tawau Farming will become a wholly-owned subsidiary of Lay Hong when the proposed acquisition completes.

“The proposed acquisition is undertaken to enable Sri Tawau Farming to become a wholly-owned subsidiary of the company.

“Pursuant thereto, the company will be able to fully consolidate the financial performance of Sri Tawau Farming group.

“The board believes that, barring unforeseen circumstances, the proposed acquisition is expected to contribute positively to the future earnings of Lay Hong and its subsidiaries,” the statement read.

Pursuant to the proposed acquisition, Datuk Yap Hoong Chai’s total shareholdings in Lay Hong (direct and indirect) will increase by more than 2% within six months and thereby trigger a mandatory take-over obligation.

Yap is one of the common directors and shareholders of Lay Hong, Innofarm and Mackan, and the executive chairman of Lay Hong.

The company noted that both Lay Hong and Sri Tawau Farming operate in the poultry farming industry and are exposed to similar inherent risks, including the outbreaks of livestock diseases and the fluctuation in fair value of the biological assets from period to period.

It said as Sri Tawau Farming is already 50%-owned subsidiary of Lay Hong, the proposed acquisition is not expected to result in Lay Hong being exposed to additional inherent risk from the poultry farming industry.

Sri Tawau Farming’s revenue rose 10.8% to RM216.6 million in the financial year ended March 31, 2021, compared to RM195.5 million in the previous year.

The increase in revenue was driven by grocery demand growth for the group’s retail minimarket business during the Movement Control Order (MCO) period.

Lay Hong shares were flat at 32 sen by noon break today.