MOF to acquire Boustead Heavy Industries' 20.77% stake in LCS contractor for RM1

KUALA LUMPUR (Aug 21): Boustead Heavy Industries Corp Bhd (BHIC) is disposing of its 20.77% stake in Boustead Naval Shipyard Sdn Bhd (BNS) to the Ministry of Finance (MOF) for a nominal sum of RM1, following the government’s decision to take over the troubled littoral combat ship (LCS) contractor.

BHIC, the shipbuilding arm of Boustead Holdings Bhd, said its indirect wholly-owned Perstim Industries Sdn Bhd — which holds the 20.77% stake in BNS — has entered into an agreement with Ocean Sunshine Bhd (OSB), a company wholly-owned by Minister of Finance Inc-owned AES Solutions Sdn Bhd, for the disposal.

Of the remaining equity interest in BNS, Boustead Holdings holds a 68.85% stake, while Lembaga Tabung Angkatan Tentera (LTAT) owns 10.38%.

LTAT took Boustead Holdings private in June this year. It is worth noting that the MOF also holds a special share in BNS.

The disposal of the 20.77% stake serves to facilitate the decision of the government to acquire 100% of shares in BNS in order to ensure the completion of the LCS project, said BHIC in a bourse filing on Monday (Aug 21).

“It is also formed as part of the company’s operational and organisational restructuring to streamline and realign entities within the company and its relevant subsidiaries while ensuring that BNS is able to complete the construction and delivery of the LCS of the Royal Malaysian Navy within the stipulated time frame pursuant to the LCS contract,” the group added.

BHIC said the RM1 selling price was determined in consideration of BNS’ latest audited net liabilities position of RM848.45 million as at end-December 2022, as well as to facilitate the government’s decision to take over the LCS contractor.

The disposal is subject to requisite approvals from BHIC and BNS’ financiers and creditors.

It is also subject to a conditional intercompany trade receivables reorganisation agreement between BHIC and BNS for the repayment of RM383.94 million or any other sum due and owed by BNS to BHIC, which will be subjected to verification in a due diligence review to be undertaken to the satisfaction of OSB.

BHIC said the disposal is expected to be completed by the fourth quarter of 2023.

BNS was awarded the contract to build six LCS vessels back in 2013. The first of the six vessels had been slated for delivery in April 2019, with BNS supposed to deliver a vessel in an interval of six months. The last vessel should have been completed by October 2021.

However, late last year, the LCS project erupted in controversy after the Public Accounts Committee revealed that not a single ship under the project had been completed, even though the government had already forked out RM6.083 billion of the initial RM9.13 billion budgeted for the job.

Following BNS’ bungle and the formation of Prime Minister Datuk Seri Anwar Ibrahim’s unity government, the MOF in May signalled its decision to take over the company to ensure the LCS project’s completion.

At the time, Anwar reasoned that the LCS project was one that had to be completed, specifically citing the RM6.083 billion hole the project already burnt in Putrajaya’s coffers, saying the government has no choice but to take over BNS to ensure the LCS project’s completion.

Meanwhile, BNS inked a sixth supplemental contract with the government with regards to the construction of the LCS. The revised contract saw the number of commissioned ships reduced to five from six but with a higher contract price of RM11.2 billion compared to the original contract cost of RM9.13 billion.

Under the revised contract, the first vessel is to be delivered in August 2026, with the fifth in April 2029.

Shares in BHIC closed 2.5 sen or 6.25% higher at 42.5 sen, giving the group a market capitalisation of RM105.59 million.

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