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Saturday, November 21, 2015

Ire-Tex gets equity swap takeover offer from Nexgram

KUALA LUMPUR (Nov 20): Packaging solutions provider Ire-Tex Bhd ( Valuation: 0.90, Fundamental: 0.35), which saw its latest quarterly net loss widened almost three-fold today, has received a conditional takeover offer from information communication and technology-based group Nexgram Holdings Bhd ( Valuation: 1.10, Fundamental: 1.55) to acquire it via an equity swap arrangement at an offer price of 40 sen per share.

It is also offering to acquire all its outstanding warrants and irredeemable convertible unsecured loan stock (ICULS) at 1 sen per outstanding warrant, and 5 sen per ICULS.

The offer price shall be satisfied through the issuance of new ordinary shares in Nexgram - which does not currently own any stake in Ire-Tex - through the issuance of new ordinary shares at an issue price of 10 sen each.

Hence, each holder of Ire-Tex's shares will get 4 Nexgram shares for every 1 Ire-Tex share surrendered, 1 Nexgram share for every 10 warrants surrendered, and 1 Nexgram share for every 2 ICULS surrendered.

Ire-Tex's major shareholder Datuk Tey Por Yee, who is also a substantial shareholder in Nexgram, is the only person acting in concert with Nexgram in the takeover bid.

According to both Ire-tex and Nexgram's filings on the corporate exercise, Nexgram's offer also extends to the securities currently held by Tey. Nexgram has obtained an irrevocable undertaking from Tey to accept the offer.

Tey holds 23.07% or 30.62 million Ire-Tex shares and 0.01% of its warrants. He also has a 14.89% stake in Nexgram and another 8.51% deemed interest by virtue of his direct stake of more than 15% in Smart Tower Sdn Bhd.

The offer shall remain open for acceptances until 5pm on the 21st day after today, and is conditional upon the company having received, before the close of the offer, valid acceptances which would result in Nexgram holding more than 50% of the voting shares of Ire-Tex.

Nexgram sees the proposed takeover as a way for it to expand its earnings base by tapping into the manufacturing and industrial segments through Ire-Tex's existing businesses. It intends to maintain Ire-Tex’s listing status on the Main Market of Bursa Malaysia.

In response to Nexgram's offer, Ire-Tex's board said it will be appointing an independent adviser to advise its non-interested directors and non-interested shareholders on the reasonableness of the offer, and that an announcement will be made in due course once the appointment is confirmed.

Separately, Ire-tex's net loss came in at RM6.7 million in its third quarter ended Sept 30, 2015 (3QFY15), compared with RM2.3 million previously, on higher losses in its automation and investment holding division.

The latest quarter's revenue, however, was up 18.1% to RM33.5 million from RM28.4 million previously, mainly due to higher contribution from its manufacturing division.

Its weaker quarterly earnings dragged its cumulative nine-month into the red with a net loss of RM11.1 million from a net profit of RM3.3 million in the same period last year, even though revenue came in 22.5% higher at RM95.3 million versus RM77.8 million previously.

Nexgram closed unchanged at 8 sen today, giving it a market capitalisation of RM150.6 million. Ire-Tex was up 1 sen or 2.9% at 36 sen, which valued it at RM46.9 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

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