KUALA LUMPUR (Jan 10): JAG Capital Holdings Bhd, which on Jan 8 (Monday) launched a voluntary takeover of KUB Malaysia Bhd, has on Tuesday (Jan 9) triggered a mandatory general offer (MGO) of the company.
This was after JAG bought 1.79 million KUB shares in the open market, which raised its shareholding in the listed entity above the 33% threshold to trigger the MGO.
JAG is controlled by Minister of Plantation Industries and Commodities Datuk Seri Johari Abdul Ghani, who is a shareholder with 98.75% stake.
Both the MGO and the voluntary offer for KUB shares and future preference shares were made by JAG at 60 sen per share.
The takeover offer follows a proposal that will see the injection of JAG’s 86.65% stake in cables and wire manufacturer Central Cables Bhd (CCB) into KUB in exchange for KUB preference shares, in a deal that is valued at RM119.42 million.
JAG said it does not intend to keep KUB’s listing status should it secure 90% of all KUB shares, while it would keep KUB listed if it secures between 75% and 90% of the shareholding. It is noted that JAG’s takeover offer of KUB is conditional upon JAG and parties acting in concert securing at least 50% stake in KUB.
If the threshold is not met, JAG will return the KUB shares to those who accepted the offer, and it will cease to be bound by any such prior acceptances of the offer, according to a filing by KUB.
With the latest open market acquisition, JAG currently holds 185.19 million KUB shares or 33.28% stake, leaving another 16.72% stake to be acquired or taken up to turn the offer unconditional by its closing date.
Aside from JAG, the other substantial shareholder of KUB is Leasing Corp Sdn Bhd with 17.97% stake. Leasing Corp is owned by Sisma Vest Sdn Bhd, which is linked to Datin Mariam Prudence Yusof.
On KUB’s acquisition of the 86.65% stake in CCB from JAG, KUB plans to issue 199.035 million five-year RCPS to JAG at 60 sen apiece as the purchase consideration.
KUB will also extend a takeover offer to the remaining 13.35% shareholders of CCB for RM18.4 million, in either cash or in RCPS.
According to company filing, Central Cables' net profit rose five-fold to RM11.65 million in the financial year ended June 30, 2023 (FY2023), from RM2.03 million in FY2022.
Revenue rose 41.69% to RM199.15 million, from RM140.55 million. The FY2023 performance was however still lower than pre-pandemic level, where it booked RM15.97 million net profit on revenue of RM230.38 million in FY2019.
Comparatively, KUB, whose core business is in the liquefied petroleum gas (LPG) business under the Solar Gas brand, saw net profit rise 86% y-o-y to RM34 million in FY2023, from RM18.28 million in FY2022.
Revenue, however, fell 10.78% to RM488.89 million, from RM547.96 million.
The rise in profit despite revenue decline was due to lower LPG purchase costs, which more than offset the lower average contract price of the product.
The acquisition of CCB will raise KUB’s FY2023 earnings per share to over three sen per share (if all its RCPS are converted into ordinary shares), from 2.63 sen per share.
At 60 sen per share, the deal values KUB at 17.6 to 18.7 times historical price-to-earnings ratio if KUB fully acquires CCB and if its RCPS are all converted into ordinary shares.
KUB has paid dividends of 1.5 sen per share for FY2021 and FY2022, and raised it to two sen per share for FY2023. It had a net cash position of RM385.11 million as at end-September 2023, compared with its market capitalisation of RM328.34 million.
Shares of KUB have traded largely range-bound between 50 sen and 60 sen in the last two years. The counter settled up half a sen or 0.85% at 59.5 sen on Tuesday. From its low of 46 sen in May, the counter has risen by 29%.
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