KUALA LUMPUR: YTL Cement Bhd, a subsidiary of YTL Corp Bhd, has entered into an agreement to sell its entire cement and ready-mixed concrete operations in Malaysia to its subsidiary Malayan Cement Bhd, for RM5.16 billion.
YTL Cement said under the agreement, Malayan Cement will acquire 12 companies under YTL Cement.
It said the total RM5.15 billion, which is subject to adjustments at point of completion, will be settled via RM2.0 billion in cash, RM1.408 billion through the issuance of 375.5 million new ordinary shares in Malayan Cement and RM1.75 billion through the issue of 466.7 million new irredeemable convertible preference shares (ICPS).
"The issue price for the new Malayan Cement shares and ICPS to be issued has been fixed at RM3.75 per share/ICPS.
"This was the price per share paid by YTL Cement for the acquisition of its 76.98 per cent equity interest in Malayan Cement in 2019, which was premised on the potential synergies that would arise from the integration of businesses between the two groups," it said.
Since the acquisition in 2019, the two groups have made significant strides in streamlining their operations and maximising efforts on their logistical, distributional and marketing fronts.
This proposed transaction is the natural progression towards increasing the size of Malayan Cement's cement and ready-mixed concrete businesses, bolstering its profitability and enhancing its value.
YTL Cement said it will consolidate similar operating businesses under a singular umbrella.
This is expected to further improve operational efficiencies and business outcomes, it said.
"By leveraging shared expertise, experience, and resources, Malayan Cement aims to eliminate overlapping functions whilst continuing to deliver seamless solutions to customers, achieving economies of scale, and enhancing their market presence.
"The partial settlement of the consideration through the issuance of new shares and ICPS rather than wholly in cash is intended to enable Malayan Cement to optimise its cash reserves and gearing levels," it said.
The strategic realignment will foster value creation for shareholders of Malayan Cement and allow investors to invest directly on a focused basis in Malaysia's leading building materials company, it said.
"This exercise will also significantly reduce related party transactions (RPTs) and conflicts of interest between YTL Cement and Malayan Cement.
"The intention is also to improve governance across both groups and lower the administrative and compliance costs incurred through the monitoring and management of these issues," it added.