Flour are seen to be fully stocked despite the rumors stating that there are flour shortage around the country.
KUALA LUMPUR: Kuantan Flour Mills Bhd (KFM) has revised its regularisation plan, more than doubling the number of new ordinary shares to be issued and giving its white knight enough shares to potentially trigger a mandatory takeover offer.
In a filing with Bursa Malaysia, KFM said that under the new plan, Wong Sak Kuan - the controlling shareholder of Lotus Essential Sdn Bhd which gave KFM’s flour milling operation a new lease of life earlier this year - would end up with between 30.33% and 33.61% of KFM’s enlarged share capital.
This is assuming that Lotus converts the preference shares it will receive into ordinary shares.
Under the original plan, announced by KFM on March 29, Wong’s shareholding in KFM would go no higher than 30.06%.
As the placement investor, he will now receive 27.29 million new shares instead of 20.47 million as per the previous plan.
In addition, Lotus, in which he owns 95.61%, will get 150 million KFM redeemable convertible preference shares (RCPS) under a debt settlement deal. Each RCPS can be converted into a new KFM ordinary share (the conversion ratio may, however, be revised under certain circumstances).
The regularisation plan also includes a proposed rights issue. The combined number of shares to be issued under the private placement and the rights issue rises substantially under the new plan.
This is due to the lower issue price of 10 sen each, compared with the 20 sen fixed previously.
Secondly, KFM has signed debt settlement agreements with the scheme creditors that varied the terms of the original debt restructuring proposal. Now only 30% of the amount owed is being waived instead of 60%.
The balance 70%, totalling RM11.66mil, would be settled via the issuance of 116.58 million settlement shares (ranking pari passu in all respects with the existing ordinary KFM shares) at 10 sen each, together with free warrants.
The original plan had called for settling 35% of the amount owed through the issuance of settlement shares (22.18 million settlement shares at 20 sen apiece) and 5% in cash.
Based on the original regularisation plan, KFM would raise up to RM48.44mil in gross proceeds from the private placement and rights issue, mainly to be used as working capital.
Under the new plan, the gross proceeds would be slightly higher, at RM50.49mil.
A completely new addition this time around is a proposed issuance of 150 million RCPS to Lotus. This serves to repay RM15mil out of the RM16.35mil in advances and supplier’s credit extended by Lotus as at Sept 15.
The issued share capital of KFM, currently at 68.23 million shares (value: RM3.44mil), will swell to as many as 1.14 billion shares (RM108.95mil). Under the original plan, the enlarged issued share capital would reach up to only 332.63 million shares (RM56.32mil).
KFM, which fell into Practice Note 17 status in December 2015, has incurred losses for eight consecutive years. Due to its severe cash flow situation and the prolonged loss position, it decided to temporarily cease its flour milling operations at the end of September 2016.
For a short period last year, Government-owned Felcra Bhd showed interest in making a reverse takeover of KFM. However, it withdrew its interest, catching the market by surprise.
Then Wong, the majority owner of Lotus Essential Sdn Bhd, came along.
Lotus, which trades industrial raw materials such as industrial and food grade starches, entered into a business collaboration agreement with KFM in March this year.
For starters, Lotus gave KFM supplier advances on its purchase of wheat and related production material, leading to the reactivation of KFM’s wheat flour production in May.
Under the deal, Lotus agreed to supply to KFM tapioca starch and corn starch raw materials for repacking activities and appoint KFM as distributor of the starch products.
The addition of corn starch and tapioca starch will expand KFM’s product portfolio. KFM noted that the group also aimed to manufacture corn starch in the future.
The counter closed half a sen lower at 18.5 sen on Thursday with 58,000 shares changing hands.
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