GERMAN BILLIONAIRE, JOHOR PRINCESS & N.SEMBILAN PRINCE IN NO-HOLDS-BARRED TAKEOVER BATTLE FOR OIL & GAS BORSIG GROUP – ‘TUNKU YAACOB IS NOT BACKING DOWN EVEN AS PREDATORS CIRCLE THE PREY…
KNM chairman ready to fight German tycoon’s hostile bid
Tunku Yaacob Khyra is confident of prevailing in the takeover battle initiated by Andreas Heeschen.
PETALING JAYA: The gloves are well and truly off in KNM Group Bhd’s brewing takeover battle as chairman Tunku Yaacob Khyra has thrown down the gauntlet to German billionaire Andreas Heeschen, who is allegedly seeking to snap up its prized asset, Borsig Group, on the cheap.
Tunku Yaacob, the financially distressed oil and gas provider’s largest shareholder, is not backing down even as predators circle the prey.
In fact, he is confident of prevailing in this corporate battle initiated by Heeschen and parties acting in concert who issued a requisition notice for an extraordinary general meeting (EGM) to remove him and current board members, and replace them with their own team.
“Bring on the EGM! That’s Tunku Yaacob’s (rallying cry),” said KNM CEO and managing director Ravindrasingham Balasingham in an exclusive interview with FMT Business.
Ravindrasingham said his chairman is “not worried” about Heeschen’s bid and is prepared to invest more if he has to in order to protect his interest in KNM.
“Do not forget that Tunku Yaacob has spent a lot of money building up his stake. If you’ve spent so much money to walk in, are you ready to just walk out?
“Maybe we need an EGM, to send a message to everyone that ‘I have control and I’m not going to relinquish it to anybody’,” said Ravindrasingham, who was appointed to his roles last November 2022.
Intriguingly, it also appears to be shaping up as a royalty versus royalty battle as Heeschen and his partners have nominated Johor princess Tunku Kamariah Aminah Maimunah Iskandariah Sultan Iskandar to replace Tunku Yaacob, who is a member of the Negeri Sembilan royal family.
A ‘fantastic investment’
"About 5.5% of Malaysians have moved abroad for better prospects. The global average is 3.3%.
Of those who have left Malaysia, about 1.3 million are in Singapore."
Among the KM crowd, they really hate SG becos SG shows what can be done if you stop the RR supremacy game. The… pic.twitter.com/aH1M3ons4V— James Chin (@jameschin110) September 17, 2023
Ravindrasingham said KNM, despite bearing the stigma of being a Practice Note 17 (PN17) company, is a “fantastic investment, and stands to give fantastic returns”.
“Of course, Heeschen is coming in at a lower price while Tunku Yaacob (had invested) at a higher price. But even at that price, the chairman feels that Borsig Group was a fantastic buy,” he added.
Borsig, a renowned German machinery and equipment company, has an attractive market valuation in excess of €300 million (RM1.5 billion). The group had acquired a 100% equity interest in Borsig in 2008 for €350 million.
In contrast, KNM’s market capitalisation of about RM445 million is considerably lower than Borsig’s value.
On Sept 8, Ravindrasingham claimed Heeschen’s takeover bid was a “cheaper way” to acquire the group’s crown jewels – Borsig Group and FBM Group. He said the move came as no surprise because its shares are “hugely undervalued”.
Elaborating on this, he revealed Heeschen has twice sought to acquire Borsig, the last attempt being in early 2022 which “never got concluded”. This takeover bid will be Heeschen’s third attempt to snag Borsig, albeit via a different approach.
“Any businessman would like to buy something cheap, but the fact he has attempted three times tells you something very important about Borsig,” he added.
Shareholders to determine board’s fate
When quizzed if he was confident shareholders would support the KNM board at the upcoming EGM, Ravindrasingham said it was up to the shareholders to decide.
“One group (Heeschen) is coming in, eyeing the main asset, the jewel (Borsig),” he said, adding that it was in contrast to the board’s competitive monetisation process to pare down its external debts amounting to about RM1.17 billion.
According to Ravindrasingham, the KNM board is opting for an initial public offering (IPO) for Borsig on the Singapore Exchange (SGX).
“Borsig is an IPO model and not a disposal,” he stressed.
“We will get full market value for Borsig, with sufficient cash to pare down the debt and still (maintain) an equity presence to benefit from it in the future.
“The total stake we plan to offer at the pre-IPO and IPO exercise will be in the 60% region, so the remaining stake will be 40%,” he said.
He added when the company’s financials turn around, there’s nothing stopping KNM from acquiring more of Borsig and taking a bigger role in the future.
Ravindrasingham estimates that KNM will generate proceeds of about RM900 million from the Borsig IPO.
“Borsig alone can slice off a large chunk of the debt. With the recent sale of Italy-based FBM Hudson Group for €22 million (RM110 million), close to a billion ringgit will be covered by the two,” he said.
The current management is looking for a pre-IPO by end-2023 and an IPO by the second half of 2024 on the SGX.
PrimePartners Corporate Finance Pte Ltd in Singapore has been appointed as the issue manager, underwriter, and placement agent for the upcoming IPO.
More assets in the stable
Meanwhile, KNM has other assets that it can monetise. This includes its cassava-to-ethanol plant Impress Ethanol Co, Ltd in Bangkok, Thailand and its planned energy-from-waste facility in Peterborough, UK under Peterborough Green Energy Ltd which has 54 acres of land and all the licenses necessary right up to grid connection.
“The other asset disposals will easily take care of the balance (of the debt),” he said, without providing a valuation on these assets.
A bourse filing last December said the KNM board had approved the listing of Borsig on SGX with a view of achieving a market capitalisation of up to US$300 million (RM1.41 billion currently) and a placement of 49% of the enlarged share capital.
The proposed flotation forms part of the regularisation plan of KNM to be submitted to Bursa Securities in due course to address its PN17 status.
“We are here to stay and we are going to make KNM a great company going forward. I believe we can overcome all the challenges coming our way,” Ravindrasingham added.
KNM’s shares closed half-a-sen or 4.8% higher on Friday, valuing the group at RM445 million. FMT
KUALA LUMPUR : The bid to take control of KNM Group Bhd by a group of shareholders led by Andreas Heeschen comes as “no surprise” considering how undervalued the company is, said its chief executive officer and managing director Ravindrasingham Balasingham.
Heeschen, who emerged as a substantial shareholder this month, “has had a keen interest” in KNM’s crown jewels Borsig Group and FBM Group, and “has made unsuccessful acquisition attempts in the past, even as late as last year”, Ravindrasingham said in a statement.
“Is this attempted takeover of KNM Group by Mr Heeschen a cheaper way to acquire Borsig Group and FBM Group? Should this be the case, the shareholders and creditors of the KNM Group stand to lose all compared to our competitive monetisation process,” he said.
Among the replacements proposed were Johor princess Tunku Kamariah Aminah Maimunah lskandariah Binti Sultan Iskandar and Flavio Porro, a former executive director of KNM.
German-based machinery and equipment manufacturer Borsig is KNM’s most valuable asset, which Ravindrasingham said carries a market value of €300 million (RM1.5 billion).
Burdened by debt and liquidity issues, KNM is putting in place an asset monetisation exercise, and has previously attempted to dispose of the unit at a discount for €220.8 million, but the deal did not materialise.
KNM eventually fell into Practice Note 17 status after defaulting on its financial obligations, with a deadline looming in two months to submit its regularisation plan. The counter touched as low as four sen, against its net tangible asset of 21 sen per share at end-June.
KNM’s management has maintained that it has support from a majority of its creditors to improve the company’s position.
The management has done its “utmost” to maximise KNM’s asset recovery, and the company has had constant ongoing performance reviews by these creditors since December 2022, Ravindrasingham said.
Yaacob ‘serious’ about KNM; abrupt takeover creates disquiet among creditors
The abrupt takeover attempt, Ravindrasingham said, “can and will create a disturbing disquiet amongst creditors, who have been very supportive” of the company so far.
“Such unease could trigger serious actions from external creditors like Asian Development Bank[‘s trust fund Credit Guarantee and Investment Facility] (CGIF) and TA/Danos, endangering the good working relationship that the current board of directors and management has, and potentially the collapse of all progress made thus far.
“We have kept the creditors informed and have assured them that YM Tunku Datuk Yaacob Khyra is very serious about his controlling stake in KNM Group and if necessary, he will not hesitate to increase his stake,” he said, adding that the management is in discussion with lawyers, advisers and forensic specialists on the next course of action.
The tussle came just weeks before KNM’s next court hearing on Sept 20, where it will seek an extension of the restraining order to facilitate its restructuring.
“The current team has restructured the group and put in place proper professional infrastructure to monetise the various assets to achieve the debt repayment targets.
“Admittedly, it is a difficult task as the assets are located in various overseas jurisdictions and some of these assets are not in the best condition due to the state of financial distress within the group over the last few years,” he said.
The potential plan to remove KNM’s board and management could impact the court’s decision as it “creates doubt on the current draft scheme of arrangement”, he added.
It could also lead to another postponement of a decision on this restraining order by the court, until after the requisitioned extraordinary general meeting (EGM) “as previously occurred”, he said, likely referring to KNM’s EGM postponement in August last year — when Borsig’s potential buyer then, GPR Siebzigste Verwaltungsgesellschaft mbH, requested further amendments to certain terms and conditions of the sale agreement.
Pointing to KNM’s narrowing losses since 2021, Ravindrasingham said the circumstance is a “testament of the group’s high future prospects”.
“We ask that all stakeholders act in the best interest of the group, safeguarding the group’s accomplishments thus far, and that prospects for a highly sustainable business future remain firmly secure,” he added.
KNM shares were up two sen or 20% since the boardroom tussle first emerged. The counter was unchanged at 12 sen at Friday’s noon market break, giving it a market capitalisation of RM465.28 million.- https://theedgemalaysia.com/
FREE MALAYSIA TODAY / https://theedgemalaysia.com/
.