KUALA LUMPUR: Kuantan Flour Mills Bhd’s (KFM) proposed reverse takeover (RTO) of water filtrations systems provider NEP Holdings (M) Bhd (NEP) fell through after the company received a legal claim of approximately US$1.62 million (RM5.94 million) for trade finance facilities.

In a filing yesterday, KFM (fundamental: 0.8, valuation: 0.6) explained that both it and NEP had agreed not to extend the heads of agreement (HoA) in view of, among others, a writ of summons and statement of claim filed by L H Asian Trade Finance Fund Ltd for various trade finance facilities granted to the flour mill company.

“Following the mutual termination of the HoA, the parties will not be pursuing or taking any legal action against each other,” the filing read.

KFM said it will incur direct expenses in connection with the signing of the HoA and up to the final date, but did not disclose the amount.

Last week, KFM said its proposed RTO of NEP had been terminated as both parties were not able to execute the definitive agreement by the agreed deadline.

Under the HoA between KFM and NEP signed in January 2015, both parties are obliged to execute a definitive agreement no later than two months from the date of the HoA or such other date as the parties may agree in writing.

KFM said it had decided not to seek an extension of time to execute the definitive agreement and therefore terminated the HoA.

KFM shares closed one sen or 3.33% higher at 29 sen yesterday, with a total market capitalisation of RM19.79 million.

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This article first appeared in The Edge Financial Daily, on March 25, 2015.