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MeGroup raises stake in unit that operates its Honda dealerships

CATALIST-LISTED automotive parts maker and dealer MeGroup has entered a definitive sale-and-purchase agreement for an additional 25 per cent stake in its subsidiary MJN Motors Sdn Bhd, which operates the group's Honda dealerships in Malaysia, it said on Friday night.

This will increase MeGroup's stake from the current 55 per cent to 80 per cent. The proposed deal was earlier announced in April, with an aggregate consideration of up to RM3.75 million (S$1.24 million) payable to vendors Wong Sai Hou and Tan Kian Boon, who are also directors of MJN Motors.

Said MeGroup executive chairman and chief executive officer Wong Cheong Chee: "Through this increase in our stake in MJN Motors, we can consolidate our interest in the Honda dealership operations to tap the strong demand for Honda cars. As Honda continues to be the top-selling foreign car brand in Malaysia, we are confident that this demand will persist, and we will increase our marketing efforts to continue generating returns for the business."

MeGroup said on Friday that the consideration will be financed through internal resources, payable in two tranches.

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The first tranche is payable five business days after fulfilment of the last of the conditions of the agreement. This includes a consideration of RM634,352.80 to Mr Tan, to be satisfied by an issue and allotment of 1.02 million consideration shares at an issue price of 20.5 Singapore cents each, based on an exchange rate as at 12pm on Aug 14. The first tranche payable to Mr Wong is RM158,588.20 in cash.

The second tranche is payable in cash within 30 days after the auditor's report for the firm's audited financial statement for the fiscal year ended March 31, 2020. The consideration payable to Mr Tan is a sum equivalent to 20 per cent of two times the net profit after tax for that fiscal year, and to Mr Wong, 5 per cent of two times the net profit after tax for that fiscal year.

The acquisition's completion is subject to the fulfilment of conditions and necessary regulatory approval under Catalist rules. MeGroup said it will make further announcements where necessary, or as and when there are any material developments.