KUALA LUMPUR (Sept 8): The bid to take control of KNM Group Bhd by a group of shareholders led by Andreas Heeschen comes as “no surprise” considering how undervalued the company is, said its chief executive officer and managing director Ravindrasingham Balasingham.
Heeschen, who emerged as a substantial shareholder this month, “has had a keen interest” in KNM’s crown jewels Borsig Group and FBM Group, and “has made unsuccessful acquisition attempts in the past, even as late as last year”, Ravindrasingham said in a statement.
“Is this attempted takeover of KNM Group by Mr Heeschen a cheaper way to acquire Borsig Group and FBM Group? Should this be the case, the shareholders and creditors of the KNM Group stand to lose all compared to our competitive monetisation process,” he said.
Heeschen, a 7.91% indirect shareholder of German-based firearms manufacturer Heckler & Koch, on Sept 1 filed a notice with a group of shareholders seeking to remove all existing KNM directors, including its chairman Tunku Datuk Yaacob Khyra, who holds an indrect 9.44% stake in the group.
Among the replacements proposed were Johor princess Tunku Kamariah Aminah Maimunah lskandariah Binti Sultan Iskandar and Flavio Porro, a former executive director of KNM.
German-based machinery and equipment manufacturer Borsig is KNM’s most valuable asset, which Ravindrasingham said carries a market value of €300 million (RM1.5 billion).
Burdened by debt and liquidity issues, KNM is putting in place an asset monetisation exercise, and has previously attempted to dispose of the unit at a discount for €220.8 million, but the deal did not materialise.
KNM eventually fell into Practice Note 17 status after defaulting on its financial obligations, with a deadline looming in two months to submit its regularisation plan. The counter touched as low as four sen, against its net tangible asset of 21 sen per share at end-June.
KNM’s management has maintained that it has support from a majority of its creditors to improve the company’s position.
The management has done its “utmost” to maximise KNM’s asset recovery, and the company has had constant ongoing performance reviews by these creditors since December 2022, Ravindrasingham said.
Yaacob 'serious' about KNM; abrupt takeover creates disquiet among creditors
The abrupt takeover attempt, Ravindrasingham said, “can and will create a disturbing disquiet amongst creditors, who have been very supportive” of the company so far.
“Such unease could trigger serious actions from external creditors like Asian Development Bank['s trust fund Credit Guarantee and Investment Facility] (CGIF) and TA/Danos, endangering the good working relationship that the current board of directors and management has, and potentially the collapse of all progress made thus far.
“We have kept the creditors informed and have assured them that YM Tunku Datuk Yaacob Khyra is very serious about his controlling stake in KNM Group and if necessary, he will not hesitate to increase his stake,” he said, adding that the management is in discussion with lawyers, advisers and forensic specialists on the next course of action.
The tussle came just weeks before KNM’s next court hearing on Sept 20, where it will seek an extension of the restraining order to facilitate its restructuring.
“The current team has restructured the group and put in place proper professional infrastructure to monetise the various assets to achieve the debt repayment targets.
“Admittedly, it is a difficult task as the assets are located in various overseas jurisdictions and some of these assets are not in the best condition due to the state of financial distress within the group over the last few years,” he said.
The potential plan to remove KNM’s board and management could impact the court’s decision as it “creates doubt on the current draft scheme of arrangement”, he added.
It could also lead to another postponement of a decision on this restraining order by the court, until after the requisitioned extraordinary general meeting (EGM) “as previously occurred”, he said, likely referring to KNM’s EGM postponement in August last year — when Borsig’s potential buyer then, GPR Siebzigste Verwaltungsgesellschaft mbH, requested further amendments to certain terms and conditions of the sale agreement.
Pointing to KNM’s narrowing losses since 2021, Ravindrasingham said the circumstance is a “testament of the group’s high future prospects”.
“We ask that all stakeholders act in the best interest of the group, safeguarding the group’s accomplishments thus far, and that prospects for a highly sustainable business future remain firmly secure,” he added.
KNM shares were up two sen or 20% since the boardroom tussle first emerged. The counter was unchanged at 12 sen at Friday's noon market break, giving it a market capitalisation of RM465.28 million.