Melewar Industrial Group Bhd (MIG) will continue to seek a buyer for its oil and gas (O&G) outfit M3nergy Bhd should the ongoing second takeover attempt fall through, said MIG executive chairman Tunku Datuk Ya’acob Abdullah.
“As a group, we don’t want it, we want our money back to invest in steel, so we’ve been looking for a buyer for the last two years,” he told reporters after MAA Holdings Bhd’s AGM here yesterday, where he is also executive chairman.
He said the group, whose core activities are steel pipe manufacturing, power, O&G and engineering, needed the cash to replenish its inventory of increasingly expensive hot rolled coil (HRC) that was constraining cash flow in the process.
According to the New York Mercantile Exchange (NYMEX), HRC steel futures hit US$655 (RM2,115.65) a tonne this month, up 15.2% from US$555 a tonne at the beginning of this year.
“All our cash is tied up in inventory, and banks are not offering any facilities because they are wary of steel prices. We would like to liquidate all these non-core businesses,” he said.
Ya’acob added that MIG would also hive off its 5.51% stake in Australian-based Gindalbie Metals Ltd as the group needed to redeploy its cash.
MIG had on June 16 accepted the offer by Adamus Avenue Sdn Bhd (AASB) to acquire its 22.3% stake in M3nergy for RM52.3 million which it will use as working capital and to reduce its bank borrowings over the next six months.
The disposal would result in a loss of RM4.7 million to the group, but after taking into account the tax-exempt dividend of RM7 million received from M3nergy on Dec 10, 2009, a gain of about RM2.3 million would arise.
AASB, which is jointly controlled by M3nergy group managing director and CEO Datuk Shahrazi Sha’ari and his spouse Datin Tinawati Nordin, is a special purpose vehicle for the takeover offer for M3nergy. It launched the takeover offer on May 17 and the offer was recently extended by two weeks, from June 25 to July 9.
Responding to some minority shareholders’ grouses about the offer price, which was perceived as low compared with its net assets per share of RM3.19, Ya’acob said the share had not hit RM1.85 “in the longest time”.
While he concurred that the valuation was cheap, he said: “But if it is not cheap, nobody will buy it”.
“My view is, sell it, take the cash, do something else with the cash, move on, because otherwise you will be stuck there too long, and MIG needs the cash,” he added.
This second offer follows the first takeover attempt by Ya’acob’s Melewar Equities (BVI) Ltd in August 2008, when it had offered to acquire the O&G outfit for RM1.20 per share.
Some minority shareholders were dissatisfied with the offer as it was far below the company’s net tangible asset (NTA) per share of RM3.30 then. Melewar was unsuccessful in its first attempt to take M3nergy private, as it had only acquired a 72.78% stake after the offer closed in November 2008.
For its third quarter ended March 31, 2010, the O&G outfit had posted a net profit of RM5.11 million on the back of revenue of RM81.81 million versus a net loss of RM16.2 million and revenue of RM59.73 million a year earlier.
M3nergy closed unchanged at RM1.77 yesterday with 19,800 shares traded.
Meanwhile, MAA Holdings CEO and group managing director Muhamad Umar Swift said the group, which is involved in providing general and life insurance as well as takaful coverage, aimed to double the revenue contribution from the Klang Valley to 60% as it sought a strategic partner which would help reposition its business to appeal to the more urban masses. It currently derived the bulk of its life insurance business from secondary towns, he added.
This article appeared in The Edge Financial Daily, June 29, 2010.
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