Kuantan Flour Mills plans buyout of NEP Holdings

PETALING JAYA: Kuantan Flour Mills Bhd (KFM) has proposed to buy the entire stake in water filtration system firm NEP Holdings (M) Bhd for an undisclosed sum via the issuance of new company (Newco) shares at an issue price of 45 sen apiece, which will then result in a reverse take over of KFM by NEP.
In a filing with Bursa Malaysia, KFM said the corporate exercise would provide an opportunity for the existing shareholders and warrant holders of KFM to capitalise on NEP's growth potential in the distribution of water filtration.
It explained that the group has been incurring losses over the past five years due to low average selling prices of flour arising from stiff competition in the flour industry, as well as the fluctuating prices of wheat.
"In view of the declining financial performance of the existing core businesses of the KFM, the board has been actively searching for suitable business ventures to improve the prospects of KFM in the long term," it added.
For the financial year ended June 30, 2013, NEP reported a net profit of RM17.26 million, an increase of 15.24% compared with RM14.98 million a year before.
The NewCo will assume the listing status of KFM following the corporate exercise.
Lim Chang Huat is the substantial shareholder of NEP, with a 99.99% stake and would trigger the 33% mandatory general offer threshold. As such, he will be seeking an exemption from the obligation to undertake the offer upon the completion of the proposed acquisition.
Trading in KFM shares was suspended from 3.51pm yesterday pending the material announcement. Its share price was up 1 sen to 45 sen prior to the suspension.
Besides the reverse take over exercise, KFM has also proposed to reduce the par value of its shares to eliminate the accumulated losses. However, it did not disclose the quantum of the par value reduction.
Meanwhile, there will be a proposed offer for sale of Newco shares by Lim to parties to be identified.