KUALA LUMPUR: Priceworth Wood Products Bhd is expected to benefit from a timber concession in Sabah in a proposed corporate exercise with Maju Sinar Network Sdn Bhd which would also involve issuance of new Priceworth shares to the latter.

Priceworth is acquiring Maju Sinar for RM25 million which would be satisfied entirely by new 38.46 million Priceworth shares at an issue price of 65 sen each.

Under the deal announced on Friday, Jan 8, Priceworth will acquire the entire stake in Maju Sinar, comprising of 100,000 shares from the two shareholders Lee Kian Vui and Sukmah Bidu.

Lee and Sukmah each hold 50%  in Maju Sinar which has a concession agreement with the state-owned Yayasan Sabah' unit Rakyat Berjaya Sdn Bhd. The rights allow Maju Sinar to  extract timber covering 15,657.91 ha in three blocks in Pinangah forest reserve, Tongod, Sabah

The audited net assets of Maju Sinar as at Dec 31, 2008 was RM31,541 and the audited net profit was RM45,213.

Priceworth said the market value of the timber rights and interests held by Maju Sinar were RM34.12 million. Due to the deferred tax of 25%, the value of the rights would be RM25.59 million.

Based on the valuation report, the estimated net harvestable timber volume from the concession area is 756,405 cubic metres or about 48.31 cubic metres per ha. As of Oct 30, 2009 an estimated 282,492 cubic metres have been harvested, leaving a balance of 473,913 cubic metres.

Priceworth said the proposed acquisition would provide the group with immediate additional source of supply of logs for its plywood mill and sawmill.

"In addition, one of Priceworth's major timber extraction rights, concession BW8, has expired in September 2009. Hence, the additional supply of raw materials to its plywood mill and sawmill will complement Priceworth's current operation," it said.

At 65 sen per share. it was 15 sen above the five-day volume weighted average market share price up to and including Jan 7 of 50 sen.

Lee is a nephew of Priceworth managing director Lim Nyuk Foh. By issuing Priceworth shares to Lee under exercise, both Lee and Lim will hold a combined 40.48% of the enlarged paid-up of Priceworth.

Lee and Lim propose to seek an exemption from undertaking a mandatory take-over offer of Priceworth.

Priceworth expects the proposals to be completed in the first half of 2010.