#Frankly Speaking* What’s wrong with Toyota Tsusho’s offer?

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TOYOTA TSUSHO CORP’S  (TTC) interest in acquiring a significant stake in Kian Joo Can Factory Bhd (KJCF) may still be worth pursuing even though the Japanese outfit did not follow the relevant processes stipulated under local rules when making its proposal.

TTC, one of the trading arms of the Toyota Group, recently sent a non-binding letter of interest (LOI) to the KJCF board stating its interest to acquire a 51% stake in the company at a maximum tentative price of RM3.74 per share, subject to due diligence.

The LOI was received by KJCF on March 10. Due to lack of information, KJCF said that it sought further information from the Japanese outfit, including the identities of TTC’s possible partner(s), seller of the 51% stake, financing evidence for the proposed purchase, and so on.

But in a surprising turn of events, KJCF told Bursa Malaysia on March 17 that it was in no position to consider TTC’s LOI, and had informed TTC “to get appropriate advice” on the relevant processes under Bursa’s listing rules and the Malaysian Code on Takeovers and Mergers. KJCF did not elaborate on whether TTC had furnished the information.

TTC’s interest, if it is indeed serious, may still be worth pursuing as some quarters are not satisfied with the present offer from Aspire Insight Sdn Bhd, a vehicle owned by KJCF’s chief operating officer-cum-executive director Chee Khay Leong, and the Employees Provident Fund.

Pricing issues aside, the offer is seen as a management buyout because of the involvement of Chee. Considering Chee was formerly the COO of Can-One Bhd, which now controls 32.9% of KJCF, there is also speculation that Aspire’s offer has the blessing of Can-One. Can-One’s cost of shares in KJCF is half of Aspire’s offer, which is RM3.30 per share.

Some quarters also lament that information pertaining to the shareholding in Aspire between Chee and the EPF was not disclosed, hence raising questions about Chee’s exposure to the offer and his source of financing.

This article first appeared in The Edge Malaysia Weekly, on March 24, 2014.