by TMR / pic by TMR FILE

RESERVOIR Link Energy Bhd has entered into a conditional share sale agreement with Lee Seng Chi, sole shareholder and director of Founder Energy Sdn Bhd to acquire a 51% stake in FESB for a purchase consideration of RM21.2 million.

In a statement today, the company said FESB is a special purpose vehicle incorporated to undertake solar renewable energy projects in Malaysia.

“The Vendor will transfer identified business and assets of Solar Bina Engineering Sdn Bhd into FESB. Moving forward, FESB will be involved in the provision and implementation of solar photovoltaic projects,” said Reservoir.

This proposed acquisition signals Reservoir Link’s proposed diversification of its principal activities to include renewable energy business.

The Vendor has given a guarantee that FESB will achieve an aggregate profit after tax of RM13.8 million over an agreed period of 24 months post completion of the proposed acquisition. Upon completion of this acquisition, FESB will account for over 25% of the Group’s net profit based on the annualised profit guarantee.

The purchase consideration, which is based on a “willing-buyer, willing-seller” basis, represents an implied price to earnings multiple of 6.0 times based on the profit guarantee.

The purchase consideration will be satisfied by RM8.5 million cash while the remaining RM12.7 million will be via the issuance of 18.2 million new Reservoir Link shares at an issue price of RM0.70 each.

The shares will be issued in two tranches. 30% will be issued on the completion of the acquisition while the remaining 70% upon FESB achieving the profit guarantee.