- Sarawak Cable Bhd (S Cable) announced yesterday that it has obtain consent to extend the finalisation of its due diligence review for the proposed acquisition of 100% stakes in Universal Cable (M) Bhd and Leader Cable Industry Bhd for RM210mil from HNG Capital Sdn Bhd.

- The exclusive period has been extended by another 30 days until 12 Sept 2014. The consent was received from HNG.

- Other terms of the conditional offer remains unchanged.

- To recap, SCable had accepted a conditional offer from HNG for the former to purchase 100% equity interests in the two companies for RM210mil in June.

- The consideration will be settled via a combination of cash, assumption of liabilities and issuance of new shares. While no further details on the breakdown were revealed, The Edge Malaysia previously reported that 10% of new shares could be issued to partly fund the acquisitions.

- The two companies are involved in the manufacture and sale of telecommunications and power cables for the domestic and export markets.

- SCable had 60 days to carry a due diligence before it decides to enter into a share sale agreement (SSA). HNG will not offer to sell the shares to other parties during the period.

- Under the SSA, HNG will guarantee a total PBT of RM21mil at the two companies for FY14F ending Dec. Any shortfall will be paid by HNG.

- We view the offer positively as it will fortify SCable as the leading cable manufacturer in the country with an estimated market share of over 50%.

- Following the acquisition, it is understood that SCable will essentially supply all the cables for the 500kV job on a consolidated basis.

- We maintain our numbers for now as SCable is still conducting due diligence on the proposed acquisitions. An EGM is expected to be called once an offer is accepted. We place SCable UNDER REVIEW pending the firming up of acquisition details.

Source: AmeSecurities