KUALA LUMPUR (Dec 7): LCTH Corp Bhd’s major shareholder Fu Yu Investment Pte Ltd has launched a bid to take the precision plastic parts manufacturer private through a selective capital reduction (SCR) and cash repayment of RM61.31 million or 58 sen per share, amid a challenging business landscape.
Fu Yu, which owns 254.3 million shares or 70.64% shareholding in LCTH, and the parties acting in concert in the proposed exercise, collectively hold 258.66 million or 71.84% in the company.
The 58 sen offer price is a 32% premium to LCTH's closing price of 44 sen today, which values it at RM158.4 million. The counter has been trading between 43 sen and 63 sen over the past 52 weeks.
In a filing with Bursa Malaysia today, LCTH said it received a letter from Fu Yu, requesting the former to undertake the SCR which involves cancelling 105.7 million LCTH shares, representing 29.36% of the group’s share capital owned by minority shareholders. LCTH has a total share capital of 360 million shares.
Upon completion, Fu Yu’s ownership will be LCTH’s entire share capital.
“The proposed SCR will be funded via the existing cash balance and internal funds of LCTH and its subsidiaries. Fu Yu has confirmed that the proposed SCR will not fail by reason of insufficient financial capability of the LCTH Group,” Fu Yu said, adding that it does not intend to maintain LCTH’s listing status after the SCR.
This is because Fu Yu is of the view that LCTH’s listing status brings minimal benefit to itself and its shareholders.
“The company has not undertaken any fund raising activities since the initial public offering of LCTH in 2004. Further, the company is bearing additional costs for the listing status to comply with the regulatory requirements as a listed company on Bursa Securities,” it pointed out.
“The privatisation of LCTH by way of the proposed SCR also provides greater flexibility to LCTH in managing and developing the existing businesses of LCTH while exploring opportunities without the attendant cost, regulatory restrictions and compliance issues associated with its listed status on Bursa Securities,” it added.
Fu Yu also said the proposal came as LCTH is facing an intensely competitive landscape and increased operating costs, which have resulted in declining financial performance, and the proposed SCR offers entitled shareholders an opportunity to exit at a premium to the prevailing market price.
The proposals require minority shareholders’ approval in a forthcoming extraordinary general meeting.