KUALA LUMPUR (Aug 3): Johor-based plastic injection moulding and metal stamping company Ge-Shen Corp Bhd is buying a controlling 60% equity interest in Kedah-based Kibaru Manufacturing Sdn Bhd (KMSB) for RM16.8 million cash. This is in line with the group’s objective of acquiring strategic stakes in companies involved in high value-added industries with potential for future growth.

KMSB is involved in the manufacturing of and dealing in all kinds of rubber products and medical devices.

Ge-Shen said the proposed acquisition will enable the group to further expand its overall engineering and manufacturing capabilities and product offerings to its customers.

"The proposed acquisition will expand Ge-Shen Group’s scale of operations and further complements the group’s presence in the medical device segment, which is higher in value per unit and yields better profit margin," it said in a bourse filing on Thursday (Aug 3).

Ge-Shen had on Thursday entered into a share sale agreement (SSA) with the six vendors — Ooi Eng Kim who holds 20% shareholding in KMSB, Ong Yu Yuen (10%), Ong Yu Zhi (20%), Sho Kim Lian (20%), Tan Pei Pei (10%) and Un Chee Wei (20%) — to acquire 3.33 million shares, equivalent to a 60% stake, in KMSB. It did not disclose how much the vendors' respective stakes will be reduced to after the completion of the proposed acquisition.

The SSA comes with a profit guarantee whereby the vendors guarantee that KMSB will achieve a consolidated net profit of not less than RM8 million for the financial years ending Dec 31, 2024 and 2025 (FY2024 and FY2025) collectively, failing which they will be liable to pay into KMSB any shortfall between the actual audited profit after tax of KMSB for FY2024 and FY2025 and the minimum net profit.

Ge-Shen said the proposed acquisition provides an opportunity for the group to immediately increase its profitability to expand further into the manufacturing of medical devices, providing a much larger representation and percentage of overall sales from the medical and life-sciences industry.

"Kibaru Group also has a customer base which is different from the customer base of Ge-Shen Group and presents an opportunity for cross-selling and potentially the internalisation of elastomers parts. Upon the completion of the proposed acquisition, the company will also be able to consolidate the financial performance of Kibaru Group," it said.

Ge-Shen said it will fund the proposed acquisition via internal funds and bank borrowings.

Barring any unforeseen circumstances, the proposed acquisition is expected to be completed by the fourth quarter of 2023.

Ge-Shen shares closed down one sen or 0.72% to RM1.37 on Thursday, giving it a market capitalisation of RM151.66 million.