Last April 2010, I wrote the following posting KNM's MBO Fails
Let me reproduce the entire posting:
It was a laughing stock the day KNM's management announced its proposed management buyout.
It was noted in the postings KNM: Do Show Us The Money! and KNM: Should I Stay Or Should I Go?
Yesterday KNM announced what was simply expected.
- Further to the Company’s announcements dated 4 February 2010 and 22 March 2010 in relation to the above, the Board of Directors of KNM wishes to announce that after due deliberation, the Company and BlueFire Capital Group Ltd (“BlueFire”), including its partners GS Capital Partners VI Fund L.P and Mettiz Capital Limited, are unable to reach an agreement on the pricing of the Proposed Acquisition. Hence, the parties have mutually agreed that the proposal made by BlueFire on 4 February 2010 has lapsed.
That's all it can say? Is that all?
What a bloody disgrace!
Surely the company can be more transparent and shows the respect to the investing public how they failed to come into agreement on the pricing issue. What was BlueFire final bid? Was the proposal on 4th Feb 2010, the only proposal? Any newer proposal made by BlueFire? Was BlueFire even serious about the management buyout?
And who are the members of KNM management that are involved in the management buyout?
Last but not least, given what has transpired, and if the management that are involved in BlueFire's acquisition bid continues to remain in charge of the company, how should the minority shareholder view what has happened?
Biggest question that needed to be asked is, "Does the current management even has the interest of the minority shareholders in mind?"
What if the management and BlueFire returns with a much lower pricing? Not possible?
Exactly. How can the minority shareholders trust the current management now?
The current management involved with BlueFire, should look themselves in the mirror and ask themselves what have they been doing the past couple of months? Have they been focused on running and managing the company? Or are they only interested only in doing the management buyout for their own vested interest?
Stinks doesn't it?
In my flawed opinion, the board of directors should review the loyalty and the integrity of the current management involved in BlueFire. If there is no loyalty and no integrity, these management should simply go!
The Star Business carried a much detailed article: KNM deal falls through
- Thursday April 15, 2010
KNM deal falls throughBy RISEN JAYASEELAN
Offer lapses due to disagreement on pricing
PETALING JAYA: The deal to acquire the assets and liabilities of oil and gas company, KNM Group Bhd, has fallen through due to a disagreement on pricing.
The company said yesterday that the offer had lapsed by “mutual agreement of the parties,” as there was no agreement on the pricing.
It is understood that a meeting between the buyers and the board of directors of KNM had taken place yesterday afternoon, prior to the announcement.
StarBiz had three weeks ago highlighted the possibility of the buyers withdrawing the offer or lowering their price. Then, the buyers had completed their due diligence on the assets of KNM and yet, had not come up with any firm offer. The buyers had made a conditional offer to buy the assets of KNM on Feb 4, subject to a due diligence. The offer was at an indicative price of 90 sen per KNM share, totalling RM3.5bil.
It is not clear what price the buyers had offered yesterday but an analyst familiar with the situation said the board had asked the buyers for a price which was at a certain premium over the market price of KNM’s shares.
That, however, was more than what the buyers were willing to pay for KNM’s assets, the analyst said.
Maybank Investment Bank believed that the buyers had made a final offer of between 60 and 70 sen. In a note issued yesterday, Maybank Investment expected the market to react negatively over the deal falling through. Should the deal fall through, “we tactically downgrade KNM to a sell in the short term, ahead of this negative newsflow,” Maybank Investment wrote.
On the other hand, Kenanga Research head Yeonzon Yeow said that should KNM’s price dip below 60 sen a share, it would be a buying opportunity. Yeow has a fair value of 70 sen per KNM share, based on a price earnings multiple of 10 times the 2011 forecast earnings of KNM.
But some other research houses have a lower fair value of KNM, such as OSK Research, which has a fair value on KNM at 59 sen and TA Research at 62 sen. Both research houses said their fair values exclude considerations of the then indicative offer of 90 sen.
KNM founder and major shareholder Lee Swee Eng, a private equity firm called Mettiz Capital and a Goldman Sachs unit, are all part of the group seeking to buy KNM’s assets which include foreign companies in Germany and Italy.
The due diligence, which was conducted by foreign-based consultants including KPMG, is said to have cost the buyers a few million US dollars.
It is not surprising that the buyers are no longer keen to pay 90 sen a share for KNM’s assets as the latter posted an unexpected loss of RM31mil in its fourth quarter ended Dec 31, 2009. This dragged KNM’s full-year 2009 net profit to RM171mil, almost half the previous year’s RM336.4mil. The result was also significantly below analysts’ consensus forecast for FY2009 of RM288.7mil.
The poor fourth quarter results were due mainly to provisioning for foreseeable losses in its operations in Brazil, Canada and Indonesia, coupled with a revaluation of the group’s Canadian properties. Analysts said that due to the low price of oil and the general economic malaise, many of the projects that KNM was supposed to have participated in had failed to materialise.
Analysts said it was unlikely another offer for the assets of KNM could happen soon, considering that this group of buyers had already gone though a due diligence and yet could not agree on a price with the board.
The attempted KNM deal may also go down in corporate history as one of the last attempted mergers and acquisitions that had sought to use the assets and liabilities route that required only a simple majority of shareholders to approve. It would also have been the largest private equity deal ever done in the country.
The regulators are very likely to raise the shareholder approval threshold of such deals to 75% in the coming weeks.
And today 6 Oct 2011 'something' is finally done about such disgraceful behavior.
Bursa Securities raps KNM, fines directors RM200,000
Yeah.. that 'something' ... amounts to a WHOPPING rm 200,000..... :(
It's now Oct 2011 and the fine is only rm200,000?????
And to be precise that's just a shocking rm25,000 fine for each of its directors!!!
Sigh.... such a big fine... how will such fine deters others from pulling such disgraceful stunt in the future?
- Bursa Securities raps KNM, fines directors RM200,000 Written by Joseph Chin of theedgemalaysia.com
Thursday, 06 October 2011 19:07
KUALA LUMPUR: Bursa Malaysia Securities Bhd publicly reprimanded KNM GROUP BHD  for breaching the Main Market Listing Requirements.
The regulator had on Thursday, Oct 6 also rapped and fined its directors a total of RM200,000 for not disclosing enough details about a proposed takeover in February 2010.
The regulator said KNM’s announcement was “not factual, unclear, inaccurate and lacked sufficient information and material facts to enable investors to make informed investment decisions”.
Bursa Securities fined managing director and major shareholder Lee Swee Eng and seven others RM25,000 each for breaching the listing requirements.
They were executive directors Gan Siew Liat, Chew Fook Sin and Ng Boon Su, independent non-executive directors Datuk Ab. Halim Mohyiddin and Lim Yu Tey.
Two former board members -- Dato’ Mohamad Idris Mansor (resigned April 28, 2010 as independent non-executive chairman) and Lee Hui Leong (resigned on April 8, 2010 as executive director) – were also fined.
Bursa Securities said the directors had breached paragraph 16.13(b) of the Main LR for permitting, knowingly or where they had reasonable means of obtaining such knowledge, KNM to commit the breach.
To recap, KNM had on Feb 4, 2010 announced BlueFire Capital Group Ltd (Bidco), a company controlled by Lee Swee Eng (who was a major KNM shareholder) about a proposal to acquire the KNM.
The proposed price was equivalent to RM0.90 per issued ordinary share of KNM.
However, Bursa Securities said the Fe 4, 2012 announcement did not disclose crucial facts which were contained in the Bidco offer letter.
Among them was that the proposed acquisition would be fully settled by redeemable convertible preference shares in a new entity and the RCPS can be converted into non-voting ordinary shares in Bidco or redeemed for cash.
Another condition which was not stated in the announcement to shareholders was there was not new shareholder holding 5% or more in KNM or existing shareholder increasing their shares by 5% or more; or more than 10 new shareholders holding 1% or more in KNM shares.
“The conditions which formed an integral part of the Proposal were clearly of interest and material to shareholders and investors to enable them to make an informed decision regarding the proposal,” it said.
Bursa Securities said the conditions were material to assess the reasonableness of the offer and certainty of the acceptance by KNM of the proposal.
Bursa Securities noted that KNM’s share price and volume traded had increased following the announcement. KNM’s share price rose from 75 sen to 81.5 sen on Feb 5, 2010 and the volume traded on that day was 142 million (3.5% of KNM’s share capital) versus the past five-day average of 15.9 million shares traded.
The proposal subsequently lapsed on April 14, 2010.