This article first appeared in The Edge Malaysia Weekly on October 16, 2023 - October 22, 2023

FINANCIALLY troubled E.A. Technique (M) Bhd (EATech) is said to be close to securing a new white knight, say sources.

According to three sources, several big names who are well known in Corporate Malaysia are vying to acquire a block of EATech shares from Sindora Bhd, a subsidiary of Kulim (M) Bhd, which in turn is a wholly-owned unit of Johor Corp Bhd (JCorp). Through Sindora, the Johor government’s investment arm controls 50.05% of EATech. Kulim also has a direct 2.43% stake in the company.

EATech has four offshore support vessels, a product tanker largely utilised for the transport of refined petroleum products from oil refineries to end users or other refineries for further processing, and a floating storage unit (FSU), which is typically used to support production platforms at offshore oil and gas storage facilities in brownfields.

A source familiar with the goings on at JCorp says, “Earlier this month, there was a board meeting held specifically to review several proposals to buy JCorp’s stake in EATech.”

Another source says, “There are a few big names interested in Sindora’s stake in EATech. [But] the process is still ongoing.”

Interestingly, it is understood that the sale of Kulim’s stake in EATech will pave the way for a listing of the former on Bursa Malaysia. A source notes that plans for Kulim’s initial public offering had been put on the back burner for several years, and when they were last revisited, EATech had been issued a Practice Note 17 (PN17) by Bursa in February last year. “Selling its stake in EATech is part of making Kulim a pure plantation counter as well,” says another source.

Selling Kulim’s stake in EATech is not exactly news. Earlier this year, Eco World Development Group Bhd co-founder Tan Sri Abdul Rashid Abdul Manaf emerged as a white knight to buy into EATech and revive the ailing company.

However, the deal lapsed in July after a share subscription agreement entered into in March between EATech and Eco Offshore Services Sdn Bhd (EOSSB) and two individuals, Tan Sri Abdul Halim Ali and Khiruddin Ibrahim Said, was mutually terminated. EOSSB is an investment vehicle of Abdul Rashid.

Under the subscription agreement with EOSSB, Abdul Halim and Khiruddin were to subscribe for 53.05 million shares at a subscription price of RM1.131 apiece. EATech would have raised about RM60 million through the issuance of the shares.

If the subscription agreement had materialised, Abdul Rashid would have emerged as EATech’s controlling shareholder with a 53% stake, while Abdul Halim, a former chief secretary to the government and former chairman of the Employees Provident Fund, and Khiruddin, a director and shareholder of several private entities, were slated to buy a 3.5% stake each in EATech. This would have triggered a mandatory general offer by Abdul Rashid to buy up the shares he did not own in the company.

Subsequently, after the agreement fell through, EATech scrapped the regularisation plan that it had submitted to the stock exchange in April. The company was given a six-month extension by Bursa. The new deadline to submit its regularisation plan is Feb 23, 2024.

Last year, it was reported that the Johor government was working with advisers including RHB Bank Bhd, Affin Bank Bhd and AMMB Holdings Bhd on the listing of Kulim, which could raise as much as RM1 billion. JCorp was unavailable for comment at press time.

According to its website, Kulim’s plantation assets are small compared with those held by some of the behemoths on Bursa. The company has 61,687ha of plantation land, 88% of which is located in Malaysia and 12% in south Sumatra, Indonesia.

According to a company search, Kulim recently returned to the black after posting a profit after tax of RM143.45 million for the financial year ended Dec 31, 2021 (FY2021) on the back of higher revenue of RM1.65 billion. It had suffered a loss of RM461.31 million on revenue of RM1.41 billion in FY2020.

Kulim listed on the former Kuala Lumpur Stock Exchange in 1975 and JCorp became a major shareholder of the company a year later. The state-owned investment firm took Kulim private in 2016.

A market observer points out that the listing of Kulim is timely to take advantage of the strong crude palm oil prices.

EATech slipped into PN17 status — for financially distressed companies on Bursa — as its shareholders’ equity of RM5.96 million as at Dec 31, 2021, was less than 25% of its share capital of RM179.76 million.

For the first half of FY2023 ended June 30, EATech posted a net profit of RM15.29 million, compared with a net loss of RM8.61 million in the previous corresponding period. The group attributed the improvement in its financial performance to lower lay-up cost for vessels disposed of, as well as lower substitute vessel cost and lower foreign exchange losses.

Last Friday, EATech’s share price closed unchanged at 27 sen, giving the company a market capitalisation of RM143.2 million. 

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