Malaysia's Denko gets takeover offer from Singapore's Foo


Quarterly loss: Production line at Denko’s factory. Denko posted a net loss of RM18,000 in the second quarter of financial year 2017.

PETALING JAYA: Singaporean businessman Foo Chee Juan has launched a conditional voluntary takeover bid for Denko Industrial Corp Bhd as he possibly seeks to consolidate and strengthen his business footprint in the Malaysian plastic injection moulding sector.

In a filing with Bursa Malaysia, Denko, which is involved in plastic injection moulding and a wholesale of foodstuff, has announced the offer from Oregon Technology Sdn Bhd (OTSB) to acquire all of its ordinary shares at 55 sen cash a share.

OTSB, which is an investment holding company, is 100%-owned both directly and indirectly by Foo. No reasons were given in the filing as to why Foo, who does not own any shares in Denko, had launched the offer.

If OTSB’s offer is accepted by all Denko stakeholders, the former will be purchasing the complete ownership of Denko for some RM57.5mil. To date, Denko which was listed in 1991, has a market capitalisation of RM66mil.

However, the purchase of shares by Foo will only take effect if more than 50% of Denko’s ordinary shares are to be sold to him. Otherwise, the offer for purchase will be rendered void.

The offer for the ordinary shares, which will be satisfied wholly in cash, will be in force for a period of 21 days effective from the day of Bursa filing. In the event of any distribution made by Denko to its shareholders within the date of filing and the offer-for-purchase period, the offer price shall be reduced by an amount equivalent to the net distribution per Denko share.

Foo is also the founder and chief executive officer of ATA Industrial (M) Sdn Bhd.

ATA is a contract manufacturing company, principally involved in the business of manufacturing and sales of precision plastic injection moulded parts as well as assembly of electrical and electronic components and products for both local and global markets such as the UK, US, Singapore and China.

Based on the information available on the Companies Commission of Malaysia’s register, the Johor-based ATA is equally owned by Foo and another stakeholder by the name of Fong Chiu Wan.

The price offered by OTSB for Denko’s ordinary shares is valued at a premium of 20.88% above the closing price of Denko at 45.5 sen on Jan 31. Denko has clarified that OTSB intends to retain the listing status of the former, if the proposed takeover eventually materialises.

As per the listing requirements of Bursa, a listed entity must ensure that at least 25% of its total listed shares are in the hands of public shareholders. However, Bursa may use its discretion to allow a percentage lower than 25%, if it is satisfied that such low percentage is sufficient for a liquid market in such shares.

Main Market listed-Denko, which trades at a price-to-earnings ratio of about 23.6 times according to Bloomberg figures, posted a net loss of RM18,000 in the second quarter of financial year 2017.

This was despite an increase in revenue of 5.4% to RM22.7mil in contrast to the preceding year’s corresponding quarter.

However, as for financial year 2016, Denko’s after-tax profit increased by 5% to RM3mil. This was on the back of its revenue which rose by 16% to RM92.8mil, year-on-year.

With regard to ATA’s financial performance, the entity posted a revenue of about RM1.7bil and an after-tax profit of RM33.6mil for the entire financial year ended March 31, 2016.

Denko’s shares closed 35.5% up to 63 sen yesterday, in an apparent reaction to the offer for shares purchase by OTSB.


   

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