MAG Holdings acquire North Cube for RM200m to expand its aquaculture business

by ANIS HAZIM / pic by TMR FILE 

MAG Holdings Bhd has proposed to acquire 100% equity interest in North Cube Sdn Bhd for RM200 million to be among the top three players in Malaysia’s aquaculture industry.

The aquaculture-based food producer has received 99.9% approval from its shareholders who voted on the resolution at its EGM yesterday.

This is the second acquisition undertaken by MAG Holdings since its decision to diversify into the aquaculture industry, it said in a statement.

“The first acquisition of Wakuba Farm was completed in December 2019, and this helped to turnaround MAG last year, which provides the group with a breeding capacity of 2,000 tonnes of vannamei (whiteleg shrimp or king prawn) per year, and 102 prawn cultivation ponds,” MAG Holdings said.

A circular to shareholders showed that the proposed purchase consideration will be satisfied via a cash consideration of RM60 million, issuance of 300 million shares at 20 sen per share, and 400 million new redeemable preference shares (RPS).

“The prawn aquaculture farming of North Cube is situated in Tawau, Sabah, with a total of 133 prawn cultivation ponds. Following this acquisition, the breeding capacity of the enlarged MAG will increase to 4,000 tonnes per year, from the current 2,000 tonnes per year,” it said.

The proposed acquisition also comes with a profit guarantee of not less than RM18 million in aggregate on a consolidated basis for the 18-month financial period ending June, 30 2022.

“As both MAG and North Cube are involved in the aquaculture business, this earnings accretive proposed acquisition will enable both companies to leverage on their combined strengths and accelerate our expansion plan with continuous growth to emerge as a key player in the aquaculture industry in Malaysia,” MAG Holdings executive chairman Ng Min Lin said.

Ng said that the combined strength of 235 prawn cultivation ponds and its processing plants allows the group to harvest both North Cube and its existing farms into finished products, which will create economies of scale and synergy for the enlarged MAG Holdings.

According to Ng, MAG Holdings are also exploring to produce more value-added products with better margins such as peeled and deveined, and cooked prawns to a wider geographical market globally.

Previously, the group had suffered a loss after tax of RM28.6 million in its financial year ended Dec 31, 2019 (FY2019), however, it successfully turned around in FY2020 with a profit after tax of RM8.4 million, contributed mainly by the Wakuba Farm.