KNM ... Mar10

Doubts whether a proposal by its managing director Lee Swee Eng to take over its assets and liabilities at an effective price of 90 sen per share could happen.

The company did not extend BlueFire Capital Group Ltd’s (Bidco) exclusivity period for due diligence which had expired on 22 March 2010. While the exclusivity period had ended, KNM said that discussions would continue until April 16 2010 and an announcement would be made when an outcome had been reached.

The extended discussions are making investors lose some confidence. There are a lot of possibilties as to the results such as whether the deal will still be going through, or whether the offer price will be lower.

As detailed information was not given, investors are uncertain if the due diligence has been completed, as well as its outcome. Investors will have to wait the results that will be announced on April 16, 2010. The risk lies in the proposed offer aborted or offer price lowered following the weak set of 4Q09 results.

Due diligence process drags on will disappoint many investors.

KNM reported a 49.2% drop in net profit after minority interest to RM170.7 million for FY09 from RM336.4 million the previous year.