Nationwide Express proposes to buy Airpak for RM33m, merge courier ops

PETALING JAYA: Nationwide Express Courier Services Bhd (NECSB) is proposing to merge its courier business with Airpak Express (M) Sdn Bhd via a proposed acquisition of Airpak for RM33.16 million.
In a filing with Bursa Malaysia yesterday, NECSB said it had entered into a conditional share acquisition agreement with Ong Eng Lee and Lim Kew Wan to acquire the entire issued and paid-up share capital of Airpak.
The purchase consideration will be satisfied with RM30 million cash, and the issuance and allotment of 6.32 million new ordinary shares of 50 sen each in Nationwide Express Holdings Bhd (NEHB) at an issue price of 50 sen per share, which is equivalent to RM3.16 million.
Airpak is principally involved in courier services while its subsidiary Airpak Freight & Logistics Sdn Bhd is involved in the business of freight and seafreight services. The group has a network of 58 service points throughout Malaysia.
“The proposed acquisition is part of NECSB’s overall strategy to capitalise on the rapid growth in demand for e-commerce and online business activities. With the growing number of new online market places, the proposed acquisition is timely for the company to build its capabilities and capacities in the business-to-consumer segment and thereby, enhance revenue growth from the e-commerce last mile delivery services,” the company said.
The company would also streamline and rationalise resources within the two groups, enabling the enlarged group to benefit from potential cost savings, improve business efficiencies and achieve economies of scale.
The purchase consideration was arrived at after taking into account the prospects of courier service industry in Malaysia, future earnings potential and potential synergistic benefits to NECSB and its subsidiaries as well as a profit guarantee by Ong.
Ong guaranteed that Airpak and its subsidiary shall have an aggregate audited consolidated net profit of RM5 million each for two financial years ending July 31, 2017 and 2018.
In the event that the guaranteed net profits are not achieved, Ong will make good the profit shortfall by paying the shortfall amount into Airpak.
The proposed acquisition will be funded through internally generated funds and/or bank borrowings. It is conditional upon inter alia, the completion of a proposed internal reorganisation exercise, which NECSB is in the midst of.
The proposed acquisition is expected to be completed by the first quarter of 2017 and contribute positively to the future earnings and EPS of NECSB for the financial year ending March 31, 2017 onwards.
The proposed acquisition is subject to approvals of Bursa Securities and shareholders of NECSB or NEHB.