Abbreviations used herein shall, unless otherwise redefined, mean the same as those defined in the Company’s announcement dated 15 January 2024 (“Announcement”).

We refer to the Announcement and the queries from Bursa Securities dated 16 January 2024. On behalf of the Board, M&A Securities wishes to announce that the Board intends to provide further justification and reconciliation on the Company’s rationale to revise the quantum of the equity interest in the Proposed Acquisition of Metalmach from 51% to 40% (“Revision”).

The Board wishes to reiterate that the earlier proposal to acquire 51% of Metalmach was revoked and rescinded on 28 December 2023 as parties were not able to fulfil the conditions precedent within the prescribed period under the previous conditional share sale agreement dated 14 June 2023 (“Previous SSA”). This then led to the renegotiation between KSSC and the Vendor where the Vendor has resolved to hold, together with the remaining shareholders, the majority shareholdings in Metalmach, given that the Vendor is also a provider of the Guaranteed PAT. For your information, the other shareholders, namely Low Yin Chee and Wong Ching Foong, are parents of the Vendor.

The following sections further explain the Group’s rationale in respect of the Proposed Acquisition to give better visibility to shareholders and investors alike on the rationale for the Revision.

1. FINANCIAL POSITION OF THE COMPANY

The Revision will result in Metalmach becoming a 40% equity-owned associate company of KSSC upon completion of the Proposed Acquisition, and therefore, KSSC is unable to consolidate the financial results of Metalmach Group. Nevertheless, KSSC Group will still be able to account for 40% of the profit of Metalmach Group by virtue of the 40% equity held by KSSC upon completion of the Proposed Acquisition, which will improve its bottom line position. The Board recognises that this departs from the earlier rationale of being able to consolidate the results of Metalmach Group. However, the Board is of the view that the Revision is still in the best interest of the Company given the continuing growth and profitability of Metalmach Group.

2. VENDOR’S MAINTENANCE OF STATUTORY CONTROL

The rationale to revise the quantum of the Proposed Acquisition from 51% to 40% equity interest in Metalmach is attributable to the intention of the Vendor and the remaining shareholders of Metalmach to maintain a majority shareholding in Metalmach, notwithstanding the Previous SSA which included a term that the Vendor and Company would enter into a management services agreement for the Vendor to continue running Metalmach Group’s business. As part of the renegotiation between KSSC and the Vendor, the Vendor has resolved to hold together, with the remaining shareholders, the majority shareholdings in Metalmach, given that the Vendor is also a provider of the Guaranteed PAT. In holding the majority of shares in Metalmach, the Vendor and the remaining shareholders of Metalmach would retain their position as the key stakeholders and decision makers in the business operations and continue to steer the strategic direction of Metalmach, which has proven to be effective in the past years.

This announcement is dated 17 January 2024.