“Is this attempted takeover of KNM Group Bhd by Heeschen a cheaper way to acquire Borsig Group and FBM Group? Should this be the case, the shareholders and creditors of the KNM Group stand to lose all compared to our competitive monetisation process,” said CEO and managing director Ravindrasingham Balasingham in a statement today.
He said this move to acquire KNM came as no surprise because the group’s shares are “hugely undervalued”.
“Even in terms of book value, its net tangible asset (NTA) is 21 sen per share because KNM holds the renowned machinery and equipment company (Germany-based) Borsig Group with an attractive market valuation, in excess of €300 million (RM1.5 billion),” he added. The market value of Italy-based FBM Group could not be ascertained.
In contrast, KNM’s current market capitalisation of RM465 million is considerably lower than that of the two companies combined.
On Sept 1, Heeschen together with parties acting in concert filed a notice to remove all existing KNM directors, including chairman Tunku Yaacob Khyra, who is the largest shareholder with a 9.44% stake and a member of the Negeri Sembilan royal family.
The group are proposing to have Johor princess Tunku Kamariah Aminah Maimunah lskandariah Sultan Iskandar replace Tunku Yaacob.
Failed attempts to acquire Borsig Group
Ravindrasingham also pointed out that Heeschen, who emerged as a substantial shareholder in KNM this month with a 7.9% indirect stake, has had a keen interest in the Borsig Group and FBM Group and has made unsuccessful acquisition attempts in the past, even as late as last year.
He said Heeschen, a substantial shareholder of German firearms manufacturer Heckler & Koch, has “in-depth knowledge of the value and potential” of Borsig and FBM Group.
“Which is not surprising as one of his suggested directors to replace KNM board of directors is Flavio Porro, who was a KNM executive director and the CEO of FBM Group until December 2022, and who also spearheaded and negotiated the failed attempts to sell the Borsig Group.
“Why else would Heeschen pursue the acquisition of KNM, a PN17 company, which has a restraining order in place, in the middle of a comprehensive restructuring exercise, and an external debt of RM1.167 billion?” he asked.
Ravindrasingham said this sudden interest should in fact strongly embolden the current shareholders of the massive potential value within KNM Group.
“As I have said in the past, KNM Group is in this position because of liquidity issues and an over geared position, which the current board and management are resolving.
“The most serious element is of course the level of debt, which will be resolved once KNM’s debts are pared down with the ample resources from the asset monetisation exercise we are implementing,” he added.
Takeover’s negative impact
The KNM CEO also highlighted that an abrupt attempt to takeover KNM will create a disturbing disquiet amongst creditors, who have been very supportive thus far.
“Such unease could trigger serious actions from external creditors like the Asian Development Bank and TA/Danos, endangering the good working relationship that the current board has, and potentially collapse all progress made thus far,” Ravindrasingham said.
“We have kept the creditors informed and have assured them that KNM chairman Tunku Yaacob is very serious about his controlling stake and if necessary, will not hesitate to increase his stake,” he added.
Under the leadership of Tunku Yaacob, the management has been instructed to defend and uphold the interest of all stakeholders even if it warrants that the matter be taken to court.
“Given the issues highlighted, we are in discussion with our lawyers, advisors, and forensic specialists on the appropriate course of action,” he said.
An ad-interim restraining order (RO) court hearing for the group is coming up on Sept 20.
“We are planning to obtain an extension by showing the court that KNM has been doing our utmost given the unique challenges and that we have the support of the majority of the creditors for the RO.”
At 4.41pm, KNM’s shares were unchanged at 12 sen, valuing the group at RM465.28 million.