KUALA LUMPUR (July 27): Gold miner Borneo Oil Bhd is buying 25.22 million shares of Makin Teguh Sdn Bhd, upping its stake in the Sabah-based clinker and cement manufacturer from 29.27% to 49.27% after the completion of the acquisition.

In a bourse filing on Thursday (July 27), Borneo Oil said it had entered into a share sale agreement with Global 2332 Ltd for the acquisition of 20% equity interest in Makin Teguh for RM40 million cash, which works out to around RM1.59 a share. Global 2332 currently owns 45.21% of Makin Teguh shares.

On May 24, the group had withdrawn plans to acquire a 22% stake or 27.74 million shares in Makin Teguh for the same purchase consideration, which would have increased Borneo Oil’s stake in Makin Teguh to 51.27%.

Based on the independent valuation report prepared by Asia Equity Research Sdn Bhd (AER), the fair value of the entire equity interest in Makin Teguh is between RM220 million and RM234 million.

Borneo Oil said therefore, its board is of the view that the purchase consideration of RM40 million is fair as it represents a discount from the fair value range of between RM44 million and RM47 million ascribed by AER.

It added that the purchase consideration will be funded via internal funds, and potential equity and/or debt fundraising options.

Makin Teguh owns an integrated clinker and cement plant in Lahad Datu, Sabah, with a total land area of 8.5ha. The manufacturing plant commenced operation in July this year with an estimated annual capacity of 220,000 tonnes of cement.

"Currently, Makin Teguh is a supplier to Cement Industries (Sabah) Sdn Bhd and is also in the midst of finalising other supply agreements with interested retailers/wholesalers for the supply of cement," said Borneo Oil.

Borneo Oil believes that with a bigger equity interest, the group will be entitled to a greater participation in the potential future profits and cash flows generated from the cement business.

For the past three financial years up to the financial year ended June 30, 2022, Makin Teguh's revenue was mainly derived from the sales and trading of limestone and semi-precious stones.

Barring any unforeseen circumstances, the acquisition is expected to be completed in the second half of 2023.

Borneo Oil shares closed unchanged at 1.5 sen on Thursday, giving it a market capitalisation of RM134.68 million.