PETALING JAYA: A competing offer from Toyota Tsusho Corp (TTC) that values Kian Joo Can Factory Bhd at a higher price puts the spotlight on the Employees Provident Fund (EPF).
This is because the offer from TTC at a maximum of RM3.74 per share for Kian Joo shares to be paid in cash is much higher than the value that the EPF has attached to the can manufacturer.
“As an investor with a 10% stake in the company, the offer price of RM3.74 presents a good opportunity for EPF to realise its investment because it is much higher than the value the provident fund attached to the company.
“So there is little reason not to accept the offer,” said an investment banker.
Last November, EPF alongside Can-One Bhd’s former chief operating officer Chee Khay Leong and other unidentified partners had launched a buy-out of Kian Joo’s entire business undertaking at RM3.30 per share through an entity known as Aspire Insight Sdn Bhd.
Responding to StarBiz’s queries, EPF said: “As we are in the discussion stage, we are not at liberty to comment on any other arrangements.
“As far as we are concerned, we are still proceeding with our negotiations and are in the midst of finalising the definitive agreement for the transaction.”
The takeover exercise, which involved the acquisition of the packaging solution player’s assets and liabilities for RM1.47bil, was a longer process which might take up to a year or more, banking sources said.
“It is a longer route because the process involves court approvals. Effectively shareholders will take a longer time to get their money compared to a cash offer,” said one banker.
TTC’s offer is subject to the company getting at least 51% acceptance from shareholders. The largest shareholder in Kian Joo is Can-One with 32.9%, followed by the EPF with 10.03%.
Members of the See family that founded Kian Joo are believed to be holding more than 15%.
In a research report, PublicInvest Research said Aspire Insight had until March 14 to complete its due diligence exercise and sign definitive agreements in relation to its proposed buyout offer of the assets and liabilities of Kian Joo.
“It is now left to be seen if an extension will be sought in light of this recent development, to facilitate a higher competing offer perhaps,” the brokerage noted, adding that TTC’s unsolicited offer is closer to the research firm’s valuation of RM3.50 to RM3.70 per share.
PublicInvest Research’s target price for Kian Joo is maintained at RM3.52 on account of a potential tussle.
On the other hand, TTC’s interest in buying a 51% stake in Kian Joo presents a straightforward transaction for equity holders to sell their shares to TTC for cash. For a cash-rich conglomerate like TTC, which has cash and cash equivalents of some RM12bil as at March 31, 2013, funding should not be an issue as it would only have to fork out RM847mil for the 51%.
In a separate transaction three years ago, another Japanese firm, Oji Paper Co Ltd, had taken packaging company HPI Resources Bhd at a price-to-book value of 1.8 times.
The investment in Kian Joo will be synergistic to TTC’s operations, as the Japanese conglomerate has ventured into the Indonesian market to manufacture soft drink containers via a 30% stake in PT Hokkan Indonesia.
Nonetheless, it is not known whether Kian Joo’s major single largest shareholder Can-One may agree to the deal.
Can-One officials could not be reached for comments at press time.
A dealer noted that Can-One would not be losing out considering that it could be making a handsome profit of RM305.4mil, or 127%, as its cost for Kian Joo shares was RM241mil or RM1.65 apiece.
Other observers opined that Can-One is unlikely to cash out at this point and that Aspire Insight is unlikely to up the offer.
A source told StarBiz: “There is a bigger agenda behind the management buyout that happened last year.
“The parties acting together wanted to create a packaging hub in the region and this could only be done by merging the packaging players (Kian Joo, Can-One and Box-Pak (M) Bhd).”
He opined that the RM1.47bil buyout launched by Aspire Insight was a long-term strategy and not for short-term gains.
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