Lay Hong to place out 10% stake, set up JV with Japan's NH Foods

PETALING JAYA: Lay Hong Bhd will place out a 10% stake for RM30.5 million and set up a joint venture company with Japan's NH Foods Ltd (NHF) in a move to expand its overseas market, according to a filing with the stock exchange yesterday.

NHF is listed on the Tokyo Stock Exchange and is principally engaged in the production of, among others, fresh meat, processed foods, and dairy products.
Lay Hong yesterday announced that it has entered into a share subscription agreement with NHF for the subscription of 5.25 million placement shares or a 10% stake in the company by NHF. It also signed a memorandum of understanding to set up the JV company.
The private placement was announced on Dec 14, 2015 to raise funds with incurring interest costs from bank borrowings, and to increase the capital base of the company.
Lay Hong will hold a 49% stake in the JV and NHF the remainder.
NHF will be responsible for and will contribute its expertise in research and development (R&D), manufacturing of further processed foods, as well as for matters relating to sales and exports of further processed food to overseas markets such as Singapore and Japan.
Lay Hong will be responsible for the operations of the JV company in Malaysia, including licensing, taxation, obtaining certifications such as halal and Hazard Analysis Critical Control Point certifications, procurement of land/leasing of land (including the letting of Wisma Lay Hong in Klang, Selangor, to the JV company), logistics and sales and marketing in Malaysia.
It will also transfer the R&D functions of its existing processed food products operations to the JV company, to consolidate the R&D functions of all processed food products under the JV company.
"The MOU and proposed joint venture are part of the company's business expansion plan into the overseas market. The MOU and proposed joint venture will enable the company to leverage on NHF's R&D and manufacturing skill to expand its market to overseas with huge potential such as Singapore and Japan. The MOU and proposed joint venture is also expected to improve the financial position of the company in long run," Lay Hong told Bursa Malaysia.
The monies to subscribe for the JV company will be funded via internally-generated funds, bank borrowings and/or additional funds to be raised from the capital market.