KUALA LUMPUR : Reservoir Link Energy Bhd is looking to diversify its business and enter the solar energy business.
In a bourse filing today, the group said it has signed a share sale agreement with Lee Seng Chi to acquire a 51% stake in Founder Synergy Sdn Bhd (FESB) for RM21.17 million.
This purchase consideration will be funded via RM8.46 million in cash, and the allotment of 18.15 million new shares in Reservoir Link at 70 sen a piece to Lee.
The deal is subject to a profit guarantee, where FESB will achieve an aggregate annualised profit after tax (PAT) of RM13.8 million over 24 months after the completion of the acquisition.
30% or 5.45 million shares will be allotted to Lee once the acquisition is completed, with the remainder to be allowed once FESB mets its obligations under the profit guarantee.
Upon the acquisition’s completion, FESB will be a 51%-owned subsidiary, with Reservoir Link noting that upon the consolidation of FESB’s results, may result in more than 25% of the group’s future net profit being derived from FESB.
“This is derived from the audited consolidated PAT of RLEB Group for financial year ended Dec 31, 2020 of RM11.783 million against RLEB’s share of the expected PAT of FESB of RM3.528 million (being RLEB’s share of the annualised profit guarantee),” it added.
It will be balloting shareholders at an upcoming extraordinary general meeting to diversity into the renewable energy (RE) business.
As a result of the share issuance under the deal, the group’s share capital will increase to 303.15 million shares, from 285 million currently.
FESB is a special purpose vehicle set up by Lee to undertake solar RE projects in Malaysia. Under the acquisition, Lee will transfer identified business and assets of Solar Bina Engineering Sdn Bhd (which is fully owned by Lee) to FESB. As such, FESB will be involved in the provision and implementation of solar photovoltaic projects.
In a separate statement, Reservoir Link executive director Thien Chiet Chai said the move is line with the group’s mission to expand its footprint into the RE space as its new income stream.
“Fossil fuels and natural gas no doubt are crucial sources of energy but diversification into renewable energy is equally important given the group’s initiatives for cleaner and renewable energy.
“I believe that this synergistic acquisition will let us continue to increase our value and maximise the returns from our venture into RE as well as to maintain our sustainability, thereby strengthening our capabilities and competitiveness.
We are partnering with a reputable solar renewable energy operator with vast experience and track record both locally and regionally. We look forward to an accelerated pace of expansion going forward, as we tap into the enhanced technical knowledge and skilled talent pool of the enlarged Reservoir Link,” Thien said.
At 2.35pm, share in Reservoir Link were trading 1.83% or a sen higher at 56 sen, yielding a market capitalisation of RM158.18 million.