This article first appeared in The Edge Malaysia Weekly, on October 5 - 11, 2015.

CLIQ Energy Bhd may see the emergence of a new substantial shareholder, who will take up a controlling stake in the aspiring independent oil and gas exploration and production company.

According to a source familiar with the matter, CLIQ is planning to propose a rights issue to fund a shortfall for its qualifying acquisition (QA) to graduate from a special purpose acquisition company (SPAC). The new shareholder, who is currently a minority, is looking to take up a chunk of the rights issue to acquire his controlling stake. This assumes that this shareholder will be able take up the unsubscribed rights.

“A new shareholder is coming into CLIQ, he wants a controlling stake and he is planning to take up 30% of the rights issue,” says the source while keeping mum about the individual’s identity.

He explains the shortfall is due to the decline in the ringgit and that the rights issue is also to refund dissenting shareholders who would possibly vote against the QA.

“CLIQ is looking at a possible shortfall of between US$10 million and US$15 million, at least. It is also anticipating that 25% of its shareholders will vote against the QA. CLIQ would have to refund a part of its trust fund or 73 sen per share to the dissenting shareholders,” he adds.

CLIQ (fundamental: NA; valuation: NA) was unable to shed light on the matter at press time.

According to the company’s annual report, the group’s funds under its trust account amounted to RM345.78 million as at March 31.

When the SPAC debuted on Bursa Malaysia in April 2013, it raised net proceeds of RM364 million from its initial public offering (IPO) at an issue price of 75 sen per share. From the proceeds, 90% was kept in a trust account for the purchase of a QA.

At 73 sen per share, dissenting shareholders are looking at an upside of about 8.15% compared to a base case of 67.5 sen per share (90% of 75 sen) as funds in its trust account have seen two years of accumulated interest of about 3% a year.

“The new shareholder and his proxies are planning to vote against the QA; with that he will be getting 73 sen per share. He will later take up 30% of the rights issue for the controlling stake, which will definitely be at a discount to voting against the QA,” the source says.

CLIQ reached its all-time high of 83.5 sen on May 20, 2013, before falling 28.14% to 60 sen on Sept 2, 2013. It has since inched up 13.33% to close at 68.5 sen last Friday, below its IPO price.

The source further explains that CLIQ has not decided on the price for the proposed rights issue yet, although it is planning to have 50% of the issue underwritten by an investment bank and the remaining 20% will be taken up by Best Oracle Sdn Bhd as part of the SPAC moratorium maximum subscription.

Best Oracle’s shareholders are CLIQ’s managing director and CEO Ahmad Ziyad Elias and executive director and chief financial officer Kamarul Baharin Albakri, who are also the promoters of the SPAC.

The source adds that CLIQ intends to hold an extraordinary general meeting to obtain shareholders’ approval for both corporate exercises  by the end of the year.

Note that the resolution on a QA must be approved by shareholders representing at least 75% of the total shares in a company, while a rights issue, which is an ordinary resolution, needs only 50% approval.

However, the source notes that CLIQ is still weighing other options to raise additional funds to purchase its QA. This could either be done through a vendor financing option with Psytech Firm LLP or a loan from a foreign bank.

Recall that CLIQ announced its QA in March this year, which saw the SPAC entering into a conditional sale and purchase agreement with Psytech to purchase a 51% controlling interest in a special purpose vehicle (SPV) that will be incorporated in the Republic of Kazakhstan for US$117.3 million (RM433.4 million).

Psytech will inject two of its oilfield blocks in the North Karazhanbas region into the SPV and list it on the Kazakhstan Stock Exchange prior to CLIQ’s entry as a controlling shareholder.

The proposed purchase was based on an exchange rate of 3.69 against the US dollar. The greenback has appreciated by more than 20% since then and CLIQ is currently looking at an exchange rate of about 4.42 against the US dollar.

Some US$90 million of the purchase price will come from the trust account, while the balance will be funded through vendor financing from Psytech amounting to US$27.3 million.

There is also a US$30 million requirement for working capital for the first year and Psytech will finance US$15.3 million of it through its 49% shareholding.

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