KUALA LUMPUR (June 6): Bina Puri Holdings Bhd has justified its decision to complete the acquisition of water treatment contractor Enforture Sarawak Sdn Bhd before finalising its legal, financial and operational due diligence, stating that contractual safeguards were put in place to protect the group's interests.
The company explained that completing the acquisition early would allow it to integrate Enforture Sarawak into its operations sooner and participate in the management and execution of the target company's ongoing projects at an earlier stage.
In a response to Bursa Malaysia's query, Bina Puri said a supplemental agreement signed with the vendors includes warranties, indemnities and compensation mechanisms that provide protection should any discrepancies or liabilities emerge after completion.
According to the company, the remaining due diligence work is largely administrative in nature. Outstanding legal reviews involve verification of selected supporting documents and independent searches, while the unfinished financial due diligence items are not expected to materially affect the valuation or commercial terms of the deal.
The group added that no material adverse findings have been identified so far that would warrant terminating the acquisition.
As a result, Bina Puri's board believes proceeding with the acquisition before the completion of due diligence is fair, reasonable and in the best interests of the company.
The company also noted that once due diligence is fully completed, it will recalculate the relevant percentage ratios under Bursa Malaysia's listing requirements. If the revised ratios reach or exceed 25%, shareholder approval will be sought.
Bina Puri first announced the proposed acquisition on May 5, agreeing to acquire Enforture Sarawak from Ng Tze Wei and Ng Qing Xiang for an initial cash payment of RM100,000, together with a deferred profit-linked consideration capped at RM15 million or 40% of collected net project profit, whichever is lower.
Enforture Sarawak is currently involved in projects with a combined contract value of RM192.8 million across several locations in Sarawak, including Julau, Song, Kapit, Saratok and Serian. These projects are expected to generate approximately RM52.9 million in profit before tax over the next two years.
The acquisition comes at a time when Bina Puri is undergoing debt restructuring through a scheme of arrangement with creditors while also dealing with several winding-up petitions.
Bina Puri's shares closed unchanged at 29.5 sen on Friday, giving the company a market capitalisation of approximately RM263.4 million.
What Investors Can Learn
This acquisition highlights how companies sometimes prioritise strategic timing over procedural completion when attractive assets become available. In Bina Puri's case, management believes gaining immediate access to Enforture Sarawak's ongoing projects and earnings potential outweighs the risks of completing the transaction before due diligence is fully finalised.
Investors should pay close attention to the safeguards included in acquisition agreements. Warranties, indemnities and post-completion compensation clauses can help reduce risks when due diligence remains incomplete.
The deal is also notable because the maximum acquisition cost of RM15 million appears modest relative to Enforture Sarawak's reported project order book of RM192.8 million and projected profit before tax of RM52.9 million. However, investors should remain cautious until the final due diligence results and revised percentage ratios are disclosed.
Another key consideration is Bina Puri's financial position. While the acquisition could provide new earnings streams and diversify the group's business into water treatment-related projects, the company is still undergoing debt restructuring and facing winding-up petitions. Investors should therefore assess whether management can successfully execute the acquisition while managing its existing financial challenges.
Overall, the transaction represents a potentially high-reward opportunity for Bina Puri, but the ultimate value creation will depend on the quality of Enforture Sarawak's project execution, the final due diligence outcome and Bina Puri's ability to strengthen its balance sheet.
Malaysia