United Engineers shares shot up 10 per cent yesterday after it said it is selling its Multi-Fineline Electronix (MFlex) unit to Suzhou Dongshan Precision Manufacturing.
The group expects to notch up an effective net gain of $115.2 million from the sale, and get net proceeds of about $505.3 million.
The counter jumped 10.1 per cent, or 18 cents, to close at $1.97 after a trading halt ahead of the announcement was lifted around noon.
Nasdaq-listed MFlex, which provides flexible printed circuits and assemblies, will be merged with a unit of Suzhou Dongshan, one of the largest suppliers of precision sheet metal components, with MFlex still based in California .
Each MFlex stockholder will receive US$23.95 a share at the close of the deal.
The proposed transaction values MFlex's equity at about US$610 million (S$852 million) on a fully diluted basis, and a premium of 40.8 per cent over its closing price on Feb 3. It also represents a premium of 52.2 per cent over its 30-day volume- weighted average closing price.
Suzhou Dongshan will fund the deal through a combination of cash, existing credit facilities and new debt financing. The transaction is expected to close in the third quarter.
United Engineers indirectly owns MFlex through WBL Technology (Private) and United WBL Technology. The two subsidiaries together hold a 60.2 per cent stake in MFlex.
United Engineers said it supports the merger as it is in line with its strategic review and objective of streamlining activities and businesses across the group.
Net proceeds from the deal will be used as general working capital and to repay external borrowings, the group said.
Great Eastern Holdings - which through ordinary and preference shares owns a 17 per cent stake in United Engineers - and Oversea-Chinese Banking Corporation - which owns a 4.3 per cent stake - have both said they will vote all of their shares in favour of the merger.
MFlex on Thursday posted fourth-quarter net income of US$10.4 million, or 41 US cents per diluted share, down from US$16.0 million, or 65 US cents per diluted share, in the same period last year.
Net sales for the three months ended Dec 31 was US$169 million, down from US$210 million for the same quarter a year earlier. This was due mainly to softness in the tablet and smartphone markets, MFlex said.
The lower net sales level resulted in a fourth-quarter gross margin of 11.8 per cent, down from 14.5 per cent a year earlier.