This article first appeared in The Edge Malaysia Weekly on September 11, 2023 - September 17, 2023
IN a twist of events as cash-strapped KNM Group Bhd inches forward in its turnaround plans, a group led by German billionaire Andreas Heeschen has made an audacious attempt to take control of the board.
For the investing fraternity, the latest development brings to mind the company’s plans in the past to unlock its asset value, including that of wholly-owned Borsig GmbH. The latter is regarded as a prized asset that could lift KNM out of its longstanding financial woes.
According to a filing with Bursa Malaysia, Heeschen bought 320 million shares, of which about 200 million were via a transfer of title and interest to him under “the terms of governing agreement”. The transactions took place on Aug 29, when KNM’s share price closed at nine sen.
Coincidentally, the twist of events took place after KNM completed its placement of 330.14 millions shares at 5.41 sen each two months ago. Prior to that, the company placed out 37.5 million shares at five sen each in April.
Heeschen, 63, with the support of eight other KNM shareholders, is attempting to oust the entire board of nine directors, including the company’s largest shareholder and chairman Tunku Datuk Yaacob Khyra.
Following news of the takeover, shares in KNM hit a 15-month high of 13.5 sen at noon on Sept 6 before closing at 12 sen, valuing the company at RM465.28 million, slightly less than €100 million.
While the takeover appears to have taken KNM’s shareholders by surprise, Yaacob tells The Edge in a phone interview that he questions the motivation behind the move and believes it is unlikely to succeed.
He says: “They can try to wrest the majority stake from me and friendly parties, but I highly doubt that they will be successful [because] our collective shareholding among friendly parties is substantial.
“I am confident of winning at the extraordinary general meeting (EGM).
“We’ve had dinner with Heeschen in the past year and he seemed like a friendly party. It does look as if he has been influenced by certain shareholders [to launch the takeover]. I suspect the group does not know what it is doing and is clearly not aware of the progress we have made in KNM, namely the listing of its unit Borsig GmbH on the Singapore Exchange.”
He declines to disclose the collective shareholding held by the “friendly parties”.
The businessman is ready to raise his stake in financially distressed KNM, even though his existing investment is already deep in losses.
“I did already have plans to increase my stake in the company and thought that I had a year to do so. It seems that, now, I’ll need to do it sooner,” he says.
Yaacob is the single-largest shareholder in the company, with a 9.44% indirect stake, or 347.2 million shares, held via Melewar Industrial Group Bhd. He was appointed to the oil-and-gas process equipment’s board as a non-independent non-executive director in November 2021 and subsequently redesignated as chairman in February this year.
On Sept 1, Heeschen, a major shareholder of German firearms maker Heckler & Koch, emerged as the second-largest shareholder, with a 7.91% stake, or 320 million shares.
He and the eight other shareholders holding a collective 10.69% have sent a notice of requisition to KNM to convene an EGM. The group acting in concert is seeking to appoint Johor princess Tunku Kamariah Aminah Maimunah lskandariah Sultan Iskandar as a director to replace Yaacob.
The incumbent board of directors are Tan Sri Zulhasnan Rafique, CEO and managing director Ravindrasingham Balasingham, Yee Hong Ho, Steve Ho Soo Woon, Thulasy Suppiah, Datuk Uwe Ahrens, James Beltran and Datuk Naresh Mohan, who with Yaacob are believed to hold more than 20% equity shareholding in the group.
Besides Tunku Kamariah, the petitioners have proposed that the new directors include Heeschen and Flavio Porro, a former executive director of KNM, who exited the company last December, as well as former chairman of Magna Prima Bhd and Komakcorp Bhd Datuk Abd Ghani Yusof; Edwin Silvester Das, who currently serves as Jiankun International Bhd CEO; Datuk Zaidi Mat Isa @ Hashim, executive director of SMTrack Bhd; and William H Van Vliet II, executive director of CN Asia Corp Bhd.
KNM is obliged to call for the EGM within 14 days of the date of the requisition, and hold the meeting not more than 28 days after the date of the notice.
Heeschen did not respond to queries from The Edge about his reason for taking a stake in KNM. While little is known about him, documents that The Edge sighted detail that he had previously worked in Citicorp Investment Bank and Hambros Bank Ltd in London, the UK, before assuming major shareholdings in companies dealing in cosmetics, household consumables, chemicals and firearms.
‘The takeover is to own Borsig for cheaper’
A source familiar with the matter says the new group is after KNM’s Borsig.
“Taking over KNM is a much cheaper way to own Borsig instead of buying it outright. Heeschen has a sizeable contract in the green energy space, which would be a good fit for Borsig.
“Regardless of KNM’s listing plans for Borsig, the petitioners will say KNM’s regularisation plan has been taking too long and that Heeschen’s deep pockets will be an irresistible proposition to investors,” says the source.
In a statement released last Friday, CEO Ravindrasingham says: “Heeschen has had a keen interest in the Borsig Group and FBM Group, and has made unsuccessful acquisition attempts in the past, even as late as last year, as the German businessman has in-depth knowledge of the value and potential of Borsig and FBM Hudson [Group].”
To recap, KNM’s proposed €220.8 million sale of Borsig fell through roughly six months after the announcement was made, as it decided not to extend the deal’s long-stop date from the latest Nov 30 deadline. Two weeks later, KNM’s board approved the proposal to list Borsig in Singapore.
Ravindrasingham warned that the hostile move threatened to thwart the progress that the incumbent board of directors, which took over last November, has achieved thus far in resolving KNM’s debt issues achieved.
He said: “The potential plan to replace KNM’s current board of could impact the court’s decision solely because this creates doubt on the current draft Scheme of Arrangement and, as previously occurred, lead to another postponement of decision on this Restraining Order by the court, until after the requisitioned EGM.” KNM has an ad-interim RO court hearing on Sept 20.
“Should this attempted takeover of KNM by Mr Heeschen [be] a cheaper way to own Borsig Group and FBM Group, the shareholders and creditors of KNM Group stand to lose [everything in the light of] our competitive monetisation process,” adds Ravindrasingham.
As at end-June, KNM’s debts stood at RM1.18 billion. The group had been loss-making for eight consecutive quarters and its accumulated losses have swelled to RM1.21 billion.
It seems nobody knows what Heeschen’s next move is. Whether the German will buy more KNM shares remains to be seen. More importantly, does he have a regularisation plan that could be submitted to Bursa Malaysia by the Oct 31 deadline?
One thing is for certain: Investors who subscribed to KNM’s placement shares should be laughing all the way to the bank, given the recent climb on its share price.
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