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.
Tunku Yaacob, via the Melewar Industrial Group Bhd, has an indirect stake of 9.44% or 347.2 million shares. Heeschen, a substantial shareholder of German firearms maker Heckler & Koch, emerged as a substantial shareholder of KNM after acquiring a 7.91% stake or 320 million shares at the end of last month.
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’
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 at 11 sen last Friday, valuing the group at RM445 million. - FMT
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