KUALA LUMPUR (September 23): Pan Malaysia Corp Bhd (PMC) has entered into a sale and purchase agreement with Inter Mark Resources Sdn Bhd (IMR) to acquire a total of 31.62 million shares, representing a stake of 51%, in A&W (M) Sdn Bhd (A&W Malaysia).
In an announcement in Bursa Malaysia today, PMC said that the proposed acquisition, which is valued at RM21.04 million, will be completed through a combination of cash in the amount of RM11.57 million and a share transfer of 63.11 million PMC shares at a transfer price. of 15 sen per share, amounting to 9.47 million RM.
The transfer price of 15 sen per share represents a 25% premium over the five-day weighted average price up to the 12 sen LPD.
The completion of the sale is conditional on obtaining by IMR the agreement of A Great American Brand International Pte Ltd (AGABI) to terminate the international franchise and development contract dated July 1, 2019 which was concluded between this last and first.
It is also conditional on the execution of the new international franchise agreement and the development agreement between AGABI and A&W Malaysia as well as the management by IMR of the activities of A&W Malaysia under terms and conditions to be agreed between IMR, A&W Malaysia and PMC.
The parties seek to enter into the agreement within six months of the date of the sale and purchase agreement or a date on which IMR and PMC can agree in writing.
Once the acquisition is finalized, PMC will own a 51% stake in A&W Malaysia, while IMR will own the remaining 49% stake in the fast food chain.
In addition, A&W Malaysia will be the main developer and exclusive franchisee of the A&W franchise for Malaysia.
In particular, the sale and purchase contract also comes with a guaranteed profit. IMR guarantees that A&W Malaysia’s profit before interest, taxes, depreciation and amortization (EBITDA) for the year ending December 31, 2022 (FY22) will not be less than RM 13.75 million.
In the event of a shortfall, IMR will pay the difference between the guaranteed sum and the actual EBITDA to A&W Malaysia.
Guaranteed amount refers to A&W Malaysia Guaranteed EBITDA of RM12.38 million for FY22, or 90% of RM13.75 million. If a lockdown due to the Covid-19 pandemic recurs, the guaranteed sum will be equivalent to RM11.69 million, or 85% of RM13.75 million.
Looking at the financial performance of A&W Malaysia, it suffered net losses for fiscal years 19 and 20 at RM 3.03 million and RM 2.62 million respectively.
Revenue slipped in FY20 to RM82.83 million, down 4.3% to RM 86.57 million from the previous year.
Currently, A&W Malaysia operates 62 outlets in Malaysia, where over 50% of outlets are located in the Klang Valley. It aims to reach 100 outlets by 2023 and become one of the top three fast food operators in Malaysia.
The operator of the fast food chain also intends to take advantage of the technology by capitalizing on platform aggregators and its own delivery channels while exploring options such as ghost kitchens and kiosk concepts. which have lower operating expenses, he said in the ad.
PMC believes that the acquisition of A&W Malaysia will give it the opportunity to expand and diversify its revenue and profit base in the growing fast food industry.
“Barring unforeseen circumstances, the proposed acquisition of A&W is expected to contribute positively to the long-term future earnings of the PMC group,” he said.
Separately, PMC announced its financial performance for the fourth quarter ended June 30, 2021, which saw it slide into a wider net loss of RM38.16 million from RM 6.25 million the previous year.
The group attributed the larger net loss to a depreciation of RM 25.1 million on goodwill, an impairment loss of RM 2.1 million on the amount owed by a related company and a foreign exchange loss of RM 2 million. of RM on unlisted investments.
Revenue edged up to RM 8.71 million, up 0.93% from RM 8.63 million a year ago.
“The business environment remains difficult. Nonetheless, management will continue to focus on rebuilding export sales, expanding into new markets and introducing new products in line with consumer demand. At the same time, the group will improve its operational efficiency for better productivity and profitability, ”he said.
At Thursday’s close, PMC’s share price was unchanged at 12 sen each, raising the market cap to RM60.38 million.