KUALA LUMPUR (Oct 25): Shares in Denko Industrial Corp Bhd reversed its earlier gains at mid-morning today, after it fixed the pricing for its private placement plan.

At 10.30am, Denko fell eight sen or 5.13% to RM1.48, with 175,900 shares traded, for a market capitalisation of RM161.93 million.

Earlier, the stock opened at RM1.57, compared with the previous day's closing of RM1.56.

Over the past twelve months, the stock has gained about 294.67%.

Denko on Oct 23 announced its plan to buy Integrated Manufacturing Solutions Sdn Bhd (IMS) for RM1.19 billion, which would be satisfied by issuing 1.03 billion new shares at a price of RM1.15 apiece. The purchase price is nearly nine times Denko's market value of RM133.72 million, as on Monday.

Denko had said the proposed acquisition is part of its plastic injection moulding business expansion strategy to grow its revenue and customer base and to expand its production capacity, which in turn will improve its financial performance.

It entered into a Heads of Agreement with Denko's major shareholder and executive director-cum-chairman Datuk Seri Foo Chee Juan and Datuk Fong Chiu Wan, who is a person connected with Foo, for the proposed acquisition of 6.2 million shares in IMS.

Denko is also proposing to undertake a private placement of up to 10% of the existing total number of issued shares to independent third party investor(s) to be identified at a later stage.

Yesterday, Denko has fixed the issue price for 4.18 million placement shares representing the first tranche of the proposed private placement at RM1.15 each.

For illustrative purposes, the group is expected to raise gross proceeds of up to RM12.01 million from the proposed exercise assuming that 10.45 million placement shares are placed out at an issue price of RM1.15 per placement share, representing a 9.5% discount to the five-day volume weighted average market price (VWAP) of Denko shares of RM1.2707.

The proceeds are expected to provide additional working capital and funds for capital expenditure to Denko Group for its business operations and at the same time increase the flexibility of the group's cash flow management.

"Barring any unforeseen circumstances and subject to all relevant approvals being obtained from the relevant authorities and/or parties, the proposed private placement is expected to be completed in the first quarter of 2018," said Denko in its filing with Bursa Malaysia.