Major shareholder seeks support for RM1.19bil corporate exercise
PETALING JAYA: Denko Industrial Corp Bhd major shareholder Datuk Seri Foo Chee Juan hopes to garner the support of shareholders today to approve the acquisition of an asset which he feels will bring about a major shift for the company.
Under the proposed deal, Foo is going to inject his privately-owned plastic injection moulding firm into Denko for an indicative price of RM1.19bil.
The deal would be satisfied with 1.03 billion new Denko shares that are 10 times the number of its existing shares at RM1.15 apiece.
Foo said the new asset would scale up Denko’s businesses and revenue, and emerged as a bigger player in the plastic injection moulding industry.
“We hope shareholders will support the acquisition in order to take part in a bigger entity of Denko and have a long-term view of the industry,” he told StarBiz.
Under the deal, Denko is buying Foo’s Integrated Manufacturing Solutions Sdn Bhd (IMS), which is involved in the manufacturing and sales of precision plastic injection moulded parts.
This is similar to Denko’s current business.
The IMS group posted a consolidated profit after tax of RM79.13mil for the financial year ended March 31, 2017, while its net assets stood at about RM208.4mil.
The company recorded RM1.8bil revenue for the period.
Denko, meanwhile, incurred a group loss after tax of RM11.29mil for the same financial year, compared to a profit of RM2.99mil in the preceding year.
Nonetheless, its revenue has been growing steadily.
In financial year 2017 it grew by 10% to RM101.6mil from RM92.7mil previously.
Foo said that when he first bought into Denko, it was part of IMS’ growth strategy.
“IMS has 22 factories in Tampoi, Johor. Denko was one of our neighbours that is also in a similar business with us,” he said.
Foo first emerged in Denko when he launched an unexpected takeover offer for Denko in February at a price of 55 sen a share.
The offer was at a 21% premium over Denko’s market price of 45 sen. His offer was conditional upon him reaching at least 50% of the company’s ownership and he had intended to maintain the listing status of Denko. Foo ended up with just over 50% and his move stirred excitement in the otherwise dull stock.
Prior to the offer Foo did not own any shares in Denko.
Denko shares closed at RM1.90 last Friday.
Notably, Denko, which was under the radar of analysts, has been engaging investors as it would need to embark on a share placement exercise should the proposed acquisition go through.
The proposed acquisition would be done based on the price-earning multiple of approximately 15 times.
The deal will result in Foo’s stake rising significantly to around 95% in Denko. The company will have to conduct a placement exercise of 232 million shares to meet its public spread requirement of 25%.