GW plastic bought over by Scientex

Scientex buys GW’s units for RM283.2m
Business & Markets 2012
Written by Isabelle Francis of theedgemalaysia.com   
Wednesday, 03 October 2012 17:25

KUALA LUMPUR (Oct 3): Industrial packaging manufacturer Scientex Bhd said in a statement it is acquiring the subsidiaries of GW Plastics Holdings Bhd for RM283.2 million in cash.

Scientex said the purchase Great Wall Plastic Industries Berhad and GW Packaging Sdn Bhd from GW Plastics will be funded by both internal funds and bank borrowings.

The purchase consideration translates into a price-to-earnings multiple of about 14.38 times over the combined audited net profit of GW Plastic and GW Packaging for the FY ended Dec 31, 2011 of about RM19.7 million.

The proposed acquisition, which will be completed by the first quarter of 2013, also translates into a price-to-book multiple of some 1.46 times over the combined audited net asset of GW Plastic and GW Packaging of about RM194.6 million.

Scientex said while the exercise will increase its production capacity, it also gain access into the rapidly-expanding global food and beverage market segment via GW Plastics’ blown film, and downstream printing and lamination facilities.

Scientex managing director Lim Peng Jin said the enlarged entity will see about RM1 billion in revenue, which effectively makes it one of the world’s largest manufacturers and exporters of plastic packaging products.

Currently, about 97% of GW Packaging's products are for the export market.

Lim also expects Scientex to benefit from cost savings as a result of economies of scale, in terms of operations and administrative efficiencies as well as in the procurement of raw materials.

“And, we will not stop there. We will continue to execute growth plans together with GW Plastics in the immediate future and remain committed to our vision of becoming the leading global packaging manufacturer,” Lim said in a statement on Tuesday.

Both Scientex and GW had asked for a suspension of trading of their shares last Friday until the end of Tuesday "pending an announcement of a material corporate exercise".

Based on last Friday's closing price, Scientex's market capitalisation stood at RM564 million versus GW Plastics' RM255 million. GW Plastics closed at RM1.08 while Scientex settled at RM2.45.

GW Plastics Holdings Bhd posted a net profit of RM11.44 million in the second half ended June 30, up 31% from RM8.75 million a year ago.

Revenue rose 11% to RM184.22 million from RM165.6 million a year ago. Its net asset per share stood at 87 sen as end of the quarter.

It has a short and long term debt of RM31.1 million and RM14.45 million in cash as at June 30. The acquisition by Scientex would leave GW as a cash company.

Scientex saw its net profit rise 9% to RM83.92 million for the financial year ended July 31 from RM77.25 million a year ago, on higher contributions from both its manufacturing and property segments.

Revenue jumped 9.6% to RM881.02 million from RM804.02 million. Its net asset per share was RM2.44.

Scientex said to fund the acquisition, RM83.2 million will come from internally-generated funds while RM200 million will be via bank borrowings, which will increase Scientex’s net gearing level to 0.5 time from 0.04 time currently.

The exercise is subject to the approvals from the relevant authorities and shareholders of both Scientex and GW, which will be sought at the respective and upcoming EGMs that will be convened by both parties separately.