This article first appeared in The Edge Malaysia Weekly on July 3, 2023 - July 9, 2023

PELIKAN International Corp Bhd’s shareholders can expect a big payday once the deal to sell its entire stake in Pelikan Group Gmbh (PGG) and other subsidiaries based in Germany for €136 million (RM687 million) is completed.

Its largest shareholder, Urusharta Jamaah Sdn Bhd (UJSB), which holds 157.19 million shares or a 26.06% stake, stands to get RM133.53 million from the proposed 10 sen per share special dividend and 75 sen per share in capital repayment.

Combined with the 20 sen per share special dividend from the proceeds of the disposal of the logistics centre in Germany back in July 2021, UJSB will be getting a total of RM1.05 per share from its investments in Pelikan over the last five years.

UJSB had acquired the shares from Lembaga Tabung Haji at RM2.10 each, or RM329.49 million in total, in 2018. At the time, the shares were trading at 34.5 sen. So at RM1.05 per share, UJSB stands to get a 50% yield on its investments in Pelikan, or about 10% a year.

Last Friday, Pelikan announced that it was disposing of its stake in PGG — whose subsidiaries produce and distribute stationery and office products throughout Europe, Latin America, the Middle East and Asia — to Holdham SAS.

In a filing with Bursa Malaysia, Pelikan says the company and its subsidiaries, Pelikan Holding AG (PHAG) and MOLKARI Vermietungsgesellschaft mbH & Co Objekt Falkensee KG and Pelikan PBS-Produktion Verwaltungs-GMBH (PBS), had entered into an agreement with Holdham to dispose of their entire equity interest in PGG.

This confirms a report by The Edge on April 10 that Pelikan was said to be on the verge of a major asset sale.

PHAG will also be selling its entire limited partnership interest in Pelikan PBS-Produktionsgesellschaft mbH & Co KG (PPG) and all of its equity interest in PBS to the purchaser for €1 each.

Meanwhile, Holdham will assume the debts of €15.4 million owed by Pelikan to PGG and the €16.38 million owed by PHAG to PPG.

Pelikan will hold an extraordinary general meeting for shareholders to vote on the disposal and the proposed capital repayment. It has to obtain approval from shareholders holding at least 75% of the total issued shares.

The group says it will use RM182.71 mil­lion of the RM695.44 million as working capital, to settle liabilities, repay bank borrowings and cover estimated expenses from the proposed exercise.

This will leave RM512.72 million, which it will distribute within six months of the completion of the sale — which will take place no later than Oct 31, 2023 — via a special dividend and/or a capital repayment.

For illustrative purposes, the cash distributed via a special dividend to entitled shareholders will tentatively be 10 sen per share, amounting to RM60.32 million, while the cash distributed via the proposed capital repayment will be estimated at 75 sen per share, amounting to RM452.4 million.

The capital repayment will be implemented through a reduction of its existing share capital and will not result in a cancellation of shares and a change in the number of or proportion of shares held by any shareholder.

According to Pelikan, the disposal will enable it to unlock and realise the value of its investment at an attractive valuation, and enable its shareholders to also realise their investments, partially in cash.

The price and assignment of debt represent an implied enterprise value/earnings before interest, taxes, depreciation and amortisation of 9.63 times, and an implied price-earnings ratio of 26.8 times.

Ikhlas Capital Singapore Pte Ltd, an investment holding company co-founded by Tan Sri Nazir Razak, will be one of the biggest winners with Pelikan’s disposal of its stationery business.

Ikhlas Capital’s cost of investment in Pelikan was only 39 sen per share when it subscribed to the group’s 54.84 million private placement exercise in September 2019. The subscription gave Ikhlas Capital a 9.09% holding in Pelikan.

In December 2021, after Pelikan disposed of its logistics centre in Germany for €81 million to Texas-based real estate developer Hillwood Group, the group declared a 20 sen special dividend.

Combined with the 85 sen per share in special dividend and capital repayment from the proceeds of the disposal of PGG and its subsidiaries, Ikhlas Capital will get a return of 269% over a four-year period, or 67.31% a year.

Another substantial shareholder is private equity fund manager Brahmal Vasudevan, who initially held a 6.66% stake in Pelikan via Auctus Ventures Ltd and Nominees. Auctus had trimmed its stake to 4.8%. Its average cost of investment in Pelikan is not known as the company emerged as a substantial shareholder in March 2015 and then ceased as one in June 2020.

While it hardly comes as a surprise to many that Pelikan would sell its core business, its CEO Loo Hooi Keat in July 2021 was confident of starting a new chapter for the group with the stationery business remaining intact.

Speaking to The Edge about the disposal of the Falkensee logistics centre at the time, Loo said part of the proceeds from the disposal would be used to further develop Pelikan’s product range as well as grow new markets.

The group’s performance has been commendable over the last five years, which strengthened the belief that it might hold on to the stationery business.

In the financial year ended Dec 31, 2022, Pelikan recorded a profit before tax of RM49 million as opposed to RM23.6 million in the previous year, mainly on the back of better operating results of the Americas region and the German plant.

Nonetheless, following last Friday’s announcement, it is clear that Loo and others on Pelikan’s board of directors think it is better to cash out of the stationery business while it is still profitable.

Pelikan’s share price has surged 128% year to date and closed at 85.5 sen last Friday for a market value of RM515.7 million. 

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