KUALA LUMPUR: Top Glove Corp Bhd is in talks with Adventa Capital Pte Ltd to buy the latter’s medical gloves business in a cash-and-shares deal, ending weeks of market buzz that included rival Supermax Corp Bhd being the former’s target.
Top Glove said the potential acquisition of Adventa’s unit Aspion Sdn Bhd will establish it as the largest surgical glove maker in the world, besides being the world’s largest rubber glove manufacturer.
In a filing to Bursa Malaysia yesterday, Top Glove said it had entered into a term sheet with Adventa Capital to buy the entire Aspion shares.
No initial value of the deal is disclosed but Reuters calculations showed that the purchase consideration would amount to RM1.28 billion to RM1.44 billion.
The takeover rumours began in mid-October when executive chairman Tan Sri Dr Lim Wee Chai said at Top Glove’s fourth quarter results briefing that it would be buying a rubber glove manufacturer that will cost it more than RM1 billion.
Top Glove said among the terms agreed included Aspion’s target of a net profit of at least RM80 million in the fiscal year ending October 31, 2018.
If it fails to hit that target, Advental Capital will reimburse any shortfall from that figure.
Top Glove said the indicative purchase consideration would be based on Aspion’s target net profit of at least RM80 million for the 2018 financial year, and contemplated price-to-earnings multiple of 16 to 18 times of the target profit.
In the Bursa statement, Lim said the proposed acquisition was well-aligned with Top Glove’s strategy of growth and product diversification.
The combined capabilities within the enlarged group will also support sustainable and higher growth and profitability in a fast-growing global healthcare industry,” he said in the statement.
The global market value for surgical gloves has been estimated at US$1.4 billion in 2015.
It is expected to expand by compounded annual growth rate of nine per cent while demand, currently at two billion pairs, is expected to grow to three billion pairs at a CAGR of eight per cent by 2020.
Growth is driven by developed regions including North America, Europe, and parts of Asia Pacific and Middle East, Top Glove said.
The company accounts for about one-fourth of global rubber glove production, with a manufacturing capacity of 51.9 billion pieces per year from its 33 factories in three countries including 28 in Malaysia.