THE legal wrangling over the sale of Kian Joo Can Factory Bhd’s (KJCF) assets and liabilities to Aspire Insight Sdn Bhd is likely to drag on, says a source.
Datuk Anthony See, an executive director of KJCF at present, plans to appeal against the Kuala Lumpur High Court’s recent decision to strike out his suit that aims to prevent the RM1.47 billion deal from happening. “Anthony See will file an appeal soon. The legal fight will continue,” the source adds.
Nevertheless, See is likely to withdraw his injunction application against KJCF holding an extraordinary general meeting (EGM).
The source says the withdrawal is likely to be ahead of the case management on Nov 24 as the injunction became irrelevant after See’s suit was struck out on Nov 14. “It is likely that following the withdrawal of the injunction application, KJCF’s board will proceed to hold the EGM for shareholders to vote on the deal with Aspire Insight. However, the See family may say they have close to 20% shareholding in KJCF to still block the deal.”
Aspire Insight, which is 40%-owned by the Employees Provident Fund (EPF) and 60%-owned by a vehicle led by KJCF’s chief operating officer and executive director Chee Khay Leong, needs to obtain at least 75% of the KJCF shares held by non-interested parties as required by the takeover rules.
With the EPF already owning a 10.03% stake in KJCF, Aspire Insight needs to secure a total shareholding of at least 77.5%, including its own, to push the deal through.
Apart from the See family — which comprises Anthony and his brothers and associates, who could hold a combined stake of close to 20% — acting together to vote against the deal, another hurdle for Aspire Insight could be other institutional investors sitting on the fence.
However, there is no evidence to suggest that the See family has a close to 20% stake in KJCF. Anthony’s elder brother, Teow Chuan, has been actively buying shares and held an 8.36% stake as at Nov 18, although Anthony himself was not seen acquiring more KJCF shares on the open market.
According to the list of top 30 shareholders published in KJCF’s latest annual report, as at Feb 28 this year, Anthony owned a 1.37% stake in the company while other family members, apart from Teow Chuan, held 1.61% equity interest.
Nevertheless, the source says Anthony does not seem worried that he has to withdraw the injunction application while filing his appeal.
At the time of writing, Can-One has not responded to a request for comments.
To recap, in May this year, Anthony commenced legal action against KJCF’s major shareholder Can-One, its unit Can-One International Sdn Bhd and four others, including KJCF, in a bid to prevent Can-One and Can-One International from voting on the sale of KJCF’s assets and liabilities to Aspire Insight.
In the suit, he named Yeoh Jin Hoe, Chee, KJCF, Can-One, Can-One International, Aspire Insight and Box-Pak (M) Bhd (a subsidiary of KJCF) as the defendants.
Yeoh is the major shareholder of Can-One group (which in turn is the major shareholder of KJCF with a 32.9% stake) and also the managing director of KJCF. Chee, while presently on the board and in the senior management team of KJCF, is a former COO and executive director of Can-One.
Anthony alleged that Aspire Insight’s bid for KJCF was deemed a related-party transaction because of the connections between Yeoh, Chee and the Can-One group. He sought to prevent the Can-One group from participating, deliberating and voting at any meeting to determine Aspire Insight’s bid, which at RM1.47 billion cash translates into RM3.30 per KJCF share.
The defendants then applied for the suit to be struck out, which the High Court allowed in its decision on Nov 14.
Having waited nearly a year since the Aspire Insight bid was announced in November last year, investors reacted positively to the High Court’s decision, sending KJCF up 7% from its RM2.87 close on Nov 14 to RM3.07 last Tuesday. The stock settled at RM3.02 last Friday as the deal still faces hurdles.
Despite the legal battle and facing cost challenges in terms of higher electricity tariff and minimum wage, KJCF’s operations remained on course with its financial results coming in at a satisfactory level.
In its 3QFY2014 ended Sept 30, the group delivered an 18% increase in net profit to RM37.83 million or 8.52 sen a share on higher revenue contribution from the carton division and a share of profit from a joint venture.
Earnings, however, declined 10% to RM85.23 million in the cumulative nine months ended Sept 30, owing to reduced exports from its Vietnam operation and margin compression from higher material, utility and other operating costs.
This article first appeared in The Edge Malaysia Weekly, on November 24 - 30, 2014.