Innopac signs MOU to acquire cable manufacturer in struggle for survival

EMBATTLED Innopac Holdings has entered a non-binding memorandum of understanding to partially or fully acquire FEC Power, a manufacturer and supplier of cables to the power, telecommunications and automotive industries, from its parent company, FEC Cables.

The proposed acquisition is an attempt by its board to add a cash flow-generating business "that will ensure its viability and ability to operate as a going-concern", the watch-listed company said in a Tuesday bourse filing.

Innopac's shares were suspended from trading in June 2019, and it was handed a notice of delisting that month for failure to meet the bourse's financial watch-list criteria.

Since August 2019, the company has been helmed by two independent directors who were appointed in the same month. Innopac said in its filing that it has been operating without funds, management and staff, while also defending claims from Saxo Bank and other creditors.

"The board is very aware of the challenges that it faces ahead. Efforts to monetise its existing assets has not been successful to date due to a confluence of adverse factors including the lack of internal resources, weak demand exacerbated by Covid-19 and the distraction of the Saxo Bank ongoing legal suit," it said.

FEC Cables has proposed to provide a profit guarantee to Innopac of RM20 million (S$6.4 million) profit before tax per annum for three years for the FEC Power. This guarantee will be adjusted pro-rata in the event of partial acquisition.

Innopac's continued operations as a going concern status is dependent on the proposed acquisition, it said.