KUALA LUMPUR (Sept 18): Capital A Bhd (KL:CAPITALA) announced on Wednesday that Bursa Malaysia has approved its extraordinary general meeting (EGM) circular detailing the proposed disposal of its aviation business to sister company AirAsia X Bhd (KL:AAX).

According to the company’s statement, an EGM will be held within the next three weeks for shareholders to vote on the proposal. If approved, the proposal will proceed to court for approval of the proposed distribution to shareholders via capital reduction.

Similarly, AAX announced it has obtained clearance from the stock exchange regulator for its EGM circular for shareholders related to the proposed acquisition. AAX’s EGM is expected to convene in about three weeks, with the exact date to be announced soon, the company said in a separate statement.

This clearance follows Bursa’s approval earlier this week for the listing and quotation of shares related to AAX’s acquisition.

The acquisition plan, announced by AAX in April, involves AAX acquiring Capital A’s aviation business — AirAsia Aviation Group Ltd and AirAsia Bhd — for RM6.8 billion, in exchange for RM3 billion worth of AAX shares, and for AAX to assume a RM3.83 billion debt that Capital A owes the aviation business.

“We are beyond excited about the next step of the aviation transformation. We are set to redefine the aviation future with the birth of the new AirAsia Group, where AirAsia and AAX operations unite to deliver increased profitability and returns for the shareholders,” said Capital A chief executive officer Tan Sri Tony Fernandes.

“This transaction is a key part of our long-term strategy to unlock unparalleled value for our shareholders, and position Capital A for sustainable growth across all [of] its business verticals,” he said.

AAX chairman Datuk Fam Lee Ee described the clearance as a significant milestone for the company, bringing it one step closer to completing the acquisition of Capital A's aviation assets, namely AirAsia Aviation Group and AirAsia.

This move will pave the way for the formation of a new aviation group, said AAX.

“By integrating AirAsia’s extensive network with AAX’s medium-haul capabilities, we are set to unlock significant synergies that will not only streamline our operations but are projected to increase revenue and reduce operating costs,” said Fam.

“This acquisition is a strategic step that positions us to capture greater market share in the region and drive sustainable growth. We are excited about the prospects that this acquisition will bring, enabling us to create a more robust and efficient airline group that meets the evolving needs of our guests while enhancing shareholder returns,” he added.

Capital A’s aviation business disposal to AAX will help it address its debt-heavy balance sheet, as part of efforts to exit the Practice Note 17 status it had entered in 2020.

Other steps in the pipeline include seeking investors for its branding business, and in the longer term, raising funds for the remaining non-aviation businesses in Capital A, such as the travel and finance-focused Superapp, Fernandes told The Edge in an interview earlier this year.

Capital A’s unit inks term sheet to operate MRO facility

In a separate filing, Capital A said its wholly owned Asia Digital Engineering Sdn Bhd (ADE) will operate a landing gear maintenance, repair, and overhaul (MRO) facility.

The MRO facility will be jointly owned and operated by ADE and PT Garuda Maintenance Facility Aero Asia Tbk (GMF), a subsidiary of PT Garuda Indonesia (Persero) Tbk.

Both parties have signed a conditional term sheet on the proposed investment for the facility, according to Capital A’s filing.

The proposed transaction would enable ADE to support AirAsia Group’s maintenance requirements for its own aircraft fleet, generating additional revenue while creating new business offerings through its joint investment with GMF, Capital A told Bursa Malaysia.

“There is also a potential for future business expansion and new opportunities to cater to third-party customers from the Apac (Asia Pacific) region,” it added.

At Wednesday’s noon break, Capital A’s share price was trading one sen lower at 78 sen, giving it a market capitalisation of RM3.34 billion.

AAX’s share price was five sen higher at RM1.50, valuing it at RM670.61 million.