Magnum once more.

Saw this article posted on the Star.

• More corporate deals expected at MPHB
  Magnum could make a capital repayment, and a stake in Sarawak Enterprise could be sold. These would more than clear the debts taken in the general offer for Magnum.

Here is a snippet of what it is saying.

• More corporate deals expected at MPHB
  
  BETWEEN THE LINES BY C.S.TAN
  
  Multi-Purpose Holdings Bhd (MPHB) launched one of the merger and acquisition (M&A) deals last year when it proposed a general offer (GO) for Magnum Corp Bhd at RM2.30 cash a share.

That Go was blogged before here: General Offer on Magnum!! Yup, that general offer was simply disgusting in my opinion. And RHB even asked the minority shareholders not to accept the offer. ( see Advice Given For Magnum Shareholders )

And my opinion, based from an investing perspective remains:

• One should really LEARN the lesson of never investing in a company whose management are questionable.

Anyway CS Tan from Star wrote the following:

• The offer for Magnum closes on Jan 19 but few acceptances are expected as the stock rose to a two-year high of RM2.58 on Friday, higher than the GO price.
  Meantime, MPHB bought more Magnum shares, amounting to a 10.1% stake, which raised its interest in the latter from about 40% to 50.1% on Dec 14.
  Hence, Magnum has become a subsidiary of MPHB which would be able take into its own accounts half of Magnum's earnings.

Ah yes. Now that Magnum is trading at a much, much higher price than the GO price, needless to say, the GO price would most likely not to be accepted by many.

Oh, I feel sorry for those who had sold much earlier because of the GO offer.

Now what i find utmost incredible in this whole mess, as pointed out, is that Magnum has now become a subsidiary of MPHB. LOL!! What a horrible joke.

Great to see it being pointed out.

But...

the writer than starts insinuating and speculating on certain issues.

• That, of course, came at a cost, and MPHB is believed to have taken on bank borrowings of about RM340mil to raise that stake. That would weigh on its balance sheet and give rise to additional interest costs. That bank debt, however, could easily to be cleared so that MPHB would be able to secure a larger portion of Magnum's earnings, without an increase in interest costs.
  
  There are two courses of action which MPHB is likely take to clear that debt. Firstly, Magnum could make a capital repayment of about RM680mil, of which MPHB would be entitled to RM340mil.
  
  Secondly, MPHB could sell its 15.1% stake in power producer Sarawak Enterprise Corp Bhd (SECB), which would raise about RM400mil cash.
  
  Analysts expect Magnum's cash reserves to rise to about RM1.0bil this year. It would be a logical policy for cash to flow up to strengthen MPHB's balance sheet.
  
  It would be welcome by all of Magnum's shareholders as they would also be entitled to a capital repayment.
  
  MPHB had wanted to sell its stake in SECB for many years but the price was not right. SECB's share price had even dropped below RM1 in 2003, but a steady climb since November took it to a six-year high of RM1.78 on Friday.
  
  At this level, it has become a low-hanging fruit. It could be sold to raise a lot of cash without any reduction of earnings in MPHB as SECB is not even an associated company. SECB is a non-core asset that can be sold to lighten up MPHB's bank debts that were as high as RM2bil in 2000.
  
  Through disposals of various other assets, the group's debts were reduced to a manageable level of RM640mil at the end of last year.
  
  If both events occur – Magnum makes a capital repayment and SECB is sold – MPHB could even get into a net cash position.

See how the writer speculates on the possible events?

It is believed!

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