KNM ... Feb10

KNM Group Bhd’s founder and group managing director Lee Swee Eng has proposed to acquire the entire business and undertakings of KNM in a deal worth RM3.6bil.

BlueFire Capital Group Ltd, an entity controlled by Lee, had proposed an equivalent price of 90 sen for each issued ordinary share of KNM.

Lee is currently the major shareholder of KNM with 23.74% direct and indirect shareholding in the company as at June 8, 2009.

The proposal is subject to the satisfactory completion of due diligence, receipt of firm financing commitments, and negotiation and execution of definitive documentation relating to the proposed transaction.

BlueFire was acting in collaboration with GS Capital Partners VI Fund L.P and Mettiz Capital Ltd in the acquisition and that its international adviser was Goldman Sachs (Singapore) Pte.

Pursuant to the above, the board has granted BlueFire a limited exclusivity period up to March 22, 2010 in which to complete due diligence and satisfy the other conditions of the proposal, subject to confidentiality undertakings.

KNM will also promptly engage its legal and financial advisors to assist KNM and its board in evaluating and negotiating the definitive terms of any transaction.

The funding structure and the reason of acquisition were not stated in the statement to Bursa. Lee was quoted on March 2009 as saying that a management buyout would be considered for KNM Group but it would be very difficult to raise funds in the current environment.

The offer price was about 13 times the company’s price earnings and it was a fair value for the offer.

Lee’s intention to acquire the company might be due to the improvement in the oil and gas (O&G) industry and the lower entry price for the acquisition.

For the third quarter ended Sept 30, 2009, KNM registered a net profit of RM31.9mil with revenue of RM458.3mil. Its net profit for the first nine months was RM201.8mil with revenue of RM1.4bil.
KNM, which was established in 1990, is involved in the manufacture of process equipment and processing units for O&G, petrochemicals, minerals processing, desalination, renewable energy, chemicals, steam generation, power and environment industries.

The group currently operates 19 manufacturing facilities and engineering centres in 12 countries, offering a diversified range of products and services to its clients in more than 60 countries.

Over 90% of its revenues are realised from the export markets and international business.