In a Bursa Malaysia filing today, the convenience store chain operator, via its wholly owned subsidiary Convenience Shopping (Sabah) Sdn Bhd (CSSSB), said it has signed a sale and purchase agreement (SPA) with BIG Pharmacy for the cash disposal.
The cash consideration is a RM37.5 million or 5.9% premium from the initial value of RM637.5 million that was announced on July 21. The filing did not state the reason for the increase in the valuation of the stake.
BIG Pharmacy is also acquiring the remaining 25% stake in Caring from Motivasi Optima Sdn Bhd, said to be owned by seven individuals including Caring founder and managing director Chong Yeow Siang, who holds an 18.65% stake. The amount paid for this stake was not disclosed.
This means Caring will be a wholly owned unit of BIG Pharmacy upon completion of the proposals.
The merged group will likely have an 11% share of the 3,500 pharmacies in the Malaysian market, according to an industry estimate.
BIG Pharmacy is backed by local private equity firm Creador, which is helmed by founder and CEO Brahmal Vasudevan.
In a recent interview, Brahmal revealed Creador plans to list the retail pharmacy business in the next three years.
Caring was listed in late 2014 and delisted in May 2020, following a mandatory takeover by 7-Eleven at RM2.60 a share, which valued the retail pharmacy group then at RM566 million.
For 7-Eleven, the original cost of investment for Caring group incurred from February to June 2020 amounts to approximately RM423.23 million. It expects RM251.16 million in pro-forma gains from the disposal.
Of the RM675 million proceeds, 61.66% or RM416.19 million will be utilised for 7-Cafe store expansions, followed by repayment of borrowings of RM250 million (37.04%).
The proposed disposal requires the approval of 7-Eleven shareholders at an extraordinary general meeting.
“Upon the completion of the proposed disposal, the company would be able to focus its resources to grow its convenience store segment which is expected to contribute positively to 7-Eleven group’s future income,” the company said.
7-Eleven shares closed 1 sen or 0.51% higher at RM1.99, valuing the group at RM2.21 billion.