Salcon Bhd is looking at mergers and acquisitions (M&A) to grow itself in a bid to fast track its listing plan for its China water and waste water concessions within the next two years.
Salcon chief operating officer Ooi Cheng Swee told reporters that the company aimed to have a combined plant capacity of 3,000 million litres per day (MLD) in China and was targeting to achieve this via a combination of organic growth and M&A’s with existing plant operators who have sizable assets in China.
“We do have parties talking to us, and it is maybe too early to disclose them,” he said after signing an agreement to acquire a 60 per cent stake in Darco Environmental Pte Ltd, a unit of Darco Water Technologies Ltd, for RM47.5mil.
Darko Environmental is an integrated engineering and knowledge-based water treatment solutions provider.
Darco Environmental runs two water treatment plants in Deqing country in the Zhejian province in China, namely Wukang and Qian Yuan, which have a 60 MLD and 100 MLD capacity respectively. The company expects to fund 80 per cent of the acquisition via bank borrowing and the balance from internal funds.
The Wukang and Qian Yuan plants have a 25-year and 22-year concession period respectively, and is estimated to generate total revenue of RMB1.7bil (RM842.5mil) throughout the entire concession. “Both plants have a second phase which would ensure the water supply for the next 25 years, and we are now talking to the government to upgrade the Wukang plant’s facility. We are looking at implementing the phase two of an additional 60 MLD in the next 12 months,” he said.
With the acquisition, Salcon now have a combined capacity of 1,300 MLD and now owns and operate a total of 11 water and wastewater concessions in Shandong, Zhejiang, Fujian and Jiangsu provinces in China.
Ooi said the company is still exploring opportunities for other projects in China, mainly in coastal areas and areas the company do not have a current presence in like Anhui and Guizhou.
The deal marks the first cooperation between Salcon and Darco, which entails further cooperation with Darco in other water-related ventures, principally in the industrial wastewater sector which is Darco’s core strength and area of expertise.
Darco Water chief executive officer Thye Kim Meng said Darco sold its stake to Salcon due to what the company is offering and also the decent price the company offered, while Darco itself is also doing some financial consolidation.
“We are impressed by Salcon’s aggressive attitude towards developing the China market and its intention to expand its water concessions. The two plants have a virtual monopoly for the county and with two more phases that need to be completed, that would take care of the area’s total water requirement in the future,” he said.
He also said Darco had invited Salcon to explore business possibilities in Taiwan for the installation of a sewage plant and concession and also a project in Indonesia for the supply of drinking water and to upgrade the existing facilities in the island of Bangka.
Listed on the SGX in 2002, Darco is involved in the design, fabrication, assembly, installation, commission and service engineered water systems for industrial use in Singapore and Malaysia, and has since expanded into air management system, soil remediation and solid-waste recycling.
The group, which has operations in Singapore, Malaysia, China, Taiwan, Philippines and Indonesia, serves companies across diverse industries - electronics, semiconductor, textile, food and beverage, printed circuit board, solar-energy and pharmaceuticals, and takes on municipal water and wastewater projects.
