KUALA LUMPUR: Scientex Bhd is set to further expand its flexible packaging business with the acquisition of 42.41 per cent controlling stake in Daibochi Bhd.

The conditional share sale agreement is between Scientex and several individual vendors who hold a controlling block of shareholding in Daibochi.

“This synergistic merger will create a formidable regional giant from Malaysia with extensive resources to compete globally, offering an integrated range of flexible packaging solutions to a larger client base.

“Further to extending our market reach, it brings together strong technical know-how and skilled talent to tap into the exciting growth prospects for this market segment,” Scientex managing director Lim Peng Jin said in a statement today.

He said Scientex and Diabochi together intend to become an internationally recognised global player to catalyse the future growth and development of the flexible packaging industry.

Scientex is a leading packaging manufacturer and leading property developer while Daibochi is a flexible packaging provider in the South East Asian region, with manufacturing facilities in Malaysia and Myanmar.

At the signing of the Heads of Agreement between Scientex and the vendors today, the parties agreed to enter into a conditional share sale agreement within the next two months which would see the conditional sale to Scientex of 139.1 million ordinary Daibochi shares representing 42.41 per cent stake in Daibochi held by the vendors.

The purchase price of RM222.5 million, equivalent to RM1.60 per ordinary Daibochi share, shall be satisfied by way of share exchange whereby one new ordinary Scientex share for every 5.5 Daibochi shares held.

The share sale will trigger a mandatory takeover by Scientex of the remaining shares of Daibochi.

The share sale transaction is subject to several conditions set by Bursa Malaysia.

Further, this exercise will enable Scientex to further expand its product portfolio and enhance its capabilities in the flexible packaging business through synergistic and complementary products which will allow Scientex to better serve its global customers.

By leveraging on the respective strengths, brand names and track record of both parties, Scientex would capitalise on evolving consumer needs through enhanced collaboration with international brand owners to deliver innovative and sustainable packaging solutions to address growing environmental concerns.

The proposed merger will result in the emergence of an undisputed leader of flexible plastic packaging manufacturer in Malaysia offering enhanced operating capabilities with greater economies of scale.

This will enable Scientex to penetrate the global markets by offering high quality packaging at competitive prices.

The purchase price of RM1.60 per ordinary Daibochi share represents a price-to-earnings ratio (PER) of 20.0 times the earnings per share of RM0.08 per share for the financial year ended 31 December 2017, compared to the average trading PER multiples of 17.8 for companies in similar business.

It also represents a price-to-book ratio of 2.62 times based on Daibochi’s audited net assets per share of RM0.61 as at 31 December 2017.

Scientex also intends to maintain Daibochi’s listing status on the main market of Bursa Malaysia and retain all the management and staff of Daibochi’s operations.

The share sale acquisition is expected to be completed within six months from the date of execution of the conditional share sale agreement.

The mandatory take-over offer is expected to be completed within two months from the date the share sale agreement becomes unconditional.

The acquisition, once completed, is expected to contribute positively towards Scientex’s earnings for the financial year ending 31 July 2019 onwards.