KUALA LUMPUR (Feb 27): KNM Group Bhd (KL:KNM) plans to sell its entire stake in its German unit Deutsche KNM GmbH to Japanese-based ceramic company NGK Insulators Ltd for €270 million (RM1.26 billion).

The deal, part of a regularisation plan to address its financial troubles and Practice Note 17 (PN17) status, represents a 22.3% increase from previous valuation of €220.8 million in 2022, the oil and services firm said in a filing on Thursday.

The proceeds will be used to deleverage KNM, which will significantly reduce its total borrowings to RM15.05 million from RM1.27 billion and improve its gearing ratio from 3.94 times to 0.04 times.

The disposal is classified as a major disposal as Deutsche KNM contributes 80.82% of KNM’s total revenue. Deutsche KNM also holds a 100% equity interest in Borsig GmbH and Borsig Boiler Systems GmbH.

The proposed sale comes with a string of conditions and requires a long list of approvals, including from the German Federal Cartel Office, Malaysia’s High Court, and Bursa Malaysia as well as KNM’s creditors and shareholders.

In May 2022, KNM had attempted to sell its entire stake in Borsig to GPR Siebzigste Verwaltungsgesellschaft mbH for €220.8 million. However, the deal fell through after KNM decided not to extend the deadline for additional time to fulfil the conditions precedent in the agreement.

The company had also previously planned to list Borsig after the company slipped into PN17 status in October 2022. The cash-strapped company, loss-making since 2021, secured a new credit facility of €60 million (RM280.4 million) for its Borsig in December last year.

“The buyer has a very healthy balance sheet and will be able to settle the cost of acquisition quickly as they do not require any external financing, which is very attractive to KNM,” KNM said.

NGK Insulators, listed on the Tokyo Stock Exchange, specialise in energy storage systems, industrial ceramics, and advanced materials.

If the deal goes through, KNM will book a loss of RM124.36 million from the disposal due to foreign currency translation reserves and asset revaluations.

Once the disposal is completed by the second half of 2025, KNM said that it will continue to focus on its existing process equipment manufacturing business through KNM Process Systems Sdn Bhd.

KNM Process has started bidding for process equipment projects, which may eventually become KNM’s core business, it said.

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