YAYASAN SABAH’S INNOPRISE SIGNS MOU TO EMERGE WITH A 30% STAKE IN PRICEWORTH
KOTA KINABALU, 3 SEPTEMBER 2019: Priceworth International Bhd has signed a Memorandum of Understanding (MOU) for a logs supply agreement wherein the new shares issue as part-payment for the logs supplied , could see Yayasan Sabah’s Innoprise Corporation Sdn Bhd (“Innoprise’) emerge with a total stake of up to 30 percent in the listed Sandakan timber group.
Innoprise is the investment holding vehicle of Yayasan Sabah for its various investments which includes the various subsidiaries companies owned by Yayasan Sabah. Yayasan Sabah is a Sabah State sanctioned organization that exists to promote educational and economic opportunities for the benefit of the people of Sabah.
Yayasan Sabah is currently in possession of the state’s largest timber and forest plantation/ concession in Sabah and accordingly control over a significant supply of timber logs. Priceworth and Yayasan Sabah are fleshing out a framework for a partnership to foster more downstream activities in Sabah’s timber industry, while complementing each other’s strengths in Sustainable Forest Management, Priceworth said in an announcement to Bursa Malaysia. This partnership supports the call of Chief Minister Datuk Seri Panglima Mohd Shafie Apdal to create more employment opportunities for the people of Sabah, and is aimed at helping Sabah’s timber industry move up the value chain and produce higher value wood products.
In a MOU signed on 3 September 2019, Priceworth and Innoprise set out a framework for the execution of a log supply agreement between Priceworth and Yayasan Sabah which will result in a share issue to Innoprise that would bring Innoprise’s total shareholding in Priceworth to 30 percent stake.
In respect of the log supply agreement, Priceworth has agreed to make a payment-in-kind in new Priceworth share issue to Innoprise which would result in Innoprise emerging with a 30 percent stake in Priceworth. Additionally, for the new Priceworth share issued, ICSB shall have the option to pay for the new Priceworth shares in cash. The new Priceworth shares to be issued shall be at RM 0.05 sen per share based on a 10% discount.
Yayasan Sabah will also be appointing Priceworth subsidiary Maxland as its logging contractor for identified areas of forest concessions.
To prepare for the intended share subscription agreement, Innoprise will conduct a due diligence of Priceworth. Priceworth in turn will conduct a due diligence of timber concessions which Yayasan Sabah has identified for the logs to be supplied to Priceworth’s plywood and sawn timber operations, and the container flooring manufacturing line.
Furthermore, Innoprise and Priceworth will use their best efforts to obtain government approvals for Priceworth to resume log harvesting operations, Priceworth said.
“We are well-placed as a partner for Innoprise and Yayasan Sabah as we have the capabilities to excel in the landscape of sustainable timber and forest resources,” said Priceworth executive director Richard Koo.
A joint steering committee will also be formed to monitor on a weekly basis, the progress and implementation of the MOU.
The MOU is not expected to have any material effect on Priceworth for the financial year ending 30 June 2020 but could contribute positively to the integrated timber Group’s future earnings should binding agreements materialise.
“Creating greater value from timber resources along the entire value chain of the industry will open up higher value jobs and entrepreneurship opportunities for locals. At the same time, Priceworth supports the state government’s vision of developing downstream activities and is fully committed to sustainability. All our Forest Management Units (FMU) comply fully with the relevant laws and practices,” Koo added.
Priceworth has been working on expanding its downstream operations, which included a new line for the production of container flooring. The resumption of Priceworth’s operations and a sustainable supply of raw material would enable the contribution of higher value-added products to the state’s exports.
Over the last 10 years, Priceworth has invested more than RM100 million in upgraded equipment including eight log fishers which are approved for Reduced Impact Logging (RIL), a forest harvesting technique which helps minimise the environmental impact on forests, soil and water quality.
In December 2018, Chief Minister Datuk Seri Panglima Shafie Apdal announced the intention to repurpose the Palm Oil Industrial Cluster (POIC) in Sandakan by turning it into a hub for the timber industry as Sabah needed to create a downstream value-added timber industry where local products can be manufactured and exported.
For more details, please refer to the company’s announcement to Bursa Malaysia at http://www.bursamalaysia.com/market/listed-companies/company-announcements/