Leong Hup ... Oct09

It is expanding its core businesses via the proposed raising of its stake in plantation firm Alam Muhibah Sdn Bhd (AMSB) and the acquisition of a poultry firm Ladang Ternakan Maju Sdn Bhd (LTM) for a total of RM34.05 million.

LHH is proposing to acquire an additional 21.25% stake comprising 744,813 shares of RM1 each in Alam Muhibah from several vendors for RM21.3 million via the issue of 20.29 million shares of RM1 each in LHH at an issue price of RM1.05 each. The acquisition is under a call option.

The vendors are CW Lau & Sons Sdn Bhd (CWL), Datuk Lau Bong Wong, Lau Joo Han, CN Lau & Sons Sdn Bhd, LCN & Family Sdn Bhd, Datuk Lau Eng Guang, Lau Joo Yong, HN Lau & Sons Sdn Bhd and LTN Resources Sdn Bhd.

It also proposed to acquire LTM's entire paid-up capital of 5.09 million shares of RM1 each from Amnah Ibrahim, Rahmat Ibrahim and Tan Sri Lau Tuang Nguang for RM12.75 million via the issue fo 12.14 million shares in LHH at an issue price of RM1.05 each.

AMSB was currently a 35% owned associate company, which would become a subsidiary with the acquisition with a 56.25% stake.

AMSB vendors had nominated Leong Hup Management Sdn Bhd (LHM) to receive the AMSB consideration shares in their place subject to the approval of the Securities Commission (SC) for a proposed MGO exemption.

As a result, LHM's shareholdings in LHH will increase by 5.67% from 47.71% to 53.38%, triggering a mandatory general offer.

LHM would be submitting an application to seek approval of the SC for the proposed exemption to LHM from the obligation to undertake the MGO. In the event the NGO exemption was not granted, the AMSB consideration shares will then be issued directly to the AMSB Vendors in their respective names.

AMSB is principally engaged in the operation of oil palm estate in Malaysia. As at Oct 9, 2009, AMSB has no subsidiary or associate company. For the financial year ended Oct 31, 2008, AMSB's net liabilities and net loss amounted to RM900,218 and RM671,707 respectively.

Pursuant to a plantation land development agreement dated Aug 9, 2006, with a Kelantan local authority and subsequently supplementary agreements, AMSB has been a 60-year plantation right (with an option for automatic renewal of an additional 30 years) to develop five parcels of lands designated for oil palm plantation measuring about 10,095 acres in Gua Musang. The AMSB vendors have estimated a net developable area of about 9,000 acres only.

About 3,482.47 acres of the land were planted with young oil palms of various ages between one month and two years.

With LTM as a new subsidiary, the group was expected to expand its production of day-old chicks from its current output of about 124 million birds to about 134 million birds per annum and broiler chickens from about 38 million birds to about 47 million birds.

The acquisition would further strengthen the LHH group's position as one of the largest integrated poultry farm and hatchery operators in Malaysia.

For the year ended Jan 31, 2009, LTM's consolidated NA and net profit amounted to RM12.6 million and RM1.05 million, respectively.