Potential RTO for Nakamichi, says source

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KUALA LUMPUR: Nakamichi Corp Bhd, whose shares have been suspended since last September, is seeking a “white knight” to restructure the company for a reverse takeover (RTO) to lift the suspension, a source told The Edge Financial Daily.

“They [the main shareholders] are talking to a few parties [for a potential RTO] but nothing is concrete yet,” he said, adding that in order for the company to be restructured, it has to first hive off its debts.

He said the deal is beneficial to all parties “as their shares would not be worth much otherwise”.

As at March 31, 2013, the company, which has been loss-making since financial year 2010 (FY10), had short-term and long-term borrowings of RM432,000, with accumulated losses of RM68.25 million.

Nakamichi has been embroiled in a legal tussle for over a year with its 51%-owned subsidiary Tamabina Sdn Bhd (TBS) and two company directors Lai Yun Fung and Lo Man Heng after they failed to hand over TBS’s management accounts.

Without the management accounts, Nakamichi could not submit its results for the second quarter ended June 30, 2013 (2QFY13) within the time frame set by Bursa Malaysia. Consequently, the group’s shares were suspended.

Nakamichi had lodged several complaints with the authorities and even managed to secure a High Court order last November to compel TBS to furnish the management accounts. TBS appealed to the Court of Appeal to strike out the order, but its application was dismissed.

When TBS and its two directors failed to comply with the High Court order, Nakamichi applied to have Lai and Lo imprisoned but the application was dismissed in February.

In an Aug 15 announcement with Bursa Malaysia, the group said it had received a letter from the bourse requesting Nakamichi to submit all its outstanding financial statements by Sept 21, “failing which Bursa may delist the company”.

To date, the group is still unable to issue its 2QFY13 as well as its 3QFY13 and 4QFY13 results, its audited financial statement for the financial year ended Dec 31, 2013, its annual report for 2013, and its quarterly results for the period ended March 31, 2014 (1QFY14) and June 30, 2014 (2QFY14) as Tamabina has yet to furnish its management accounts to the group.

The company’s shares remain suspended as its battle with TBS, Lai and Lo is still unresolved.

Lo, who is also Nakamichi’s former chief executive officer, when contacted and asked about the RTO, said “[I have]no idea until I know details” and reiterated that “as per Nakamichi announcements, the delisting will be on Sept 21.”

It is worth noting that Lo owns 4.54% of Nakamichi. A filing with the company registrar shows that Lo and his wife Lai are the directors of Tamabina and the couple, together with Lo’s sister Lo Shwu Fen, collectively control a 49% equity stake, while Nakamichi holds the remaining 51%.

TBS is the only Nakamichi asset with a concession to log timber from a 15,900ha tract at the Pinangah Forest Reserve in Sabah.

Meanwhile, Nakamichi’s non-independent non-executive chairman See Thoo Chan, said the group would exhaust all legal avenues to retrieve the management accounts from TSB.

On Bursa’s deadline for the group to submit its outstanding financial statements, See said: “We will write in to appeal [for an extension].”

See and husband Goh Kheng Peow, who doesn’t hold any position in Nakamichi, collectively own a 32.94% stake in Nakamichi, making them the largest shareholders in the company.

To recap, See and Goh filed counterclaims at the High Court on July 3 last year after receiving a demand notice on June 14 from Lo and Tamabina for the recovery of RM4.4 million and RM7.38 million respectively from Nakamichi.

The counterclaims filed included Lo’s breach of his fiduciary duty to Nakamichi, damages for that, and an order restraining him and/or his servants from presenting a winding-up petition against Nakamichi.

Subsequently, Lo was removed as the company’s chief executive officer at an extraordinary general meeting held on July 29. Nakamichi bought the 51% stake in TBS in Dec 2007 from Lo and Yap Siaw Lin for RM30 million cash, with the sellers providing a profit guarantee on TBS’s audited net profit of not less than RM12 million per year for FY10, FY11 and FY12.  In the event of a shortfall, Nakamichi can sell the shares to settle the difference.

But See reportedly said Lo had confirmed that “he is not aware of the whereabouts of the physical share certificates”, prompting See to lodge a police report on May 17 on the missing share certificates; the issue is still unresolved.

The company’s counter was last traded at 12.5 sen per share before its suspension last Sept 9.

The last result note dated May 29, 2013 showed that Nakamichi’s net loss had narrowed to RM422,000 in its first quarter ended March 31 last year (1QFY13) from a net loss of  RM894,000 a year ago, even as its revenue fell 31.63% to RM1.74 million from RM2.54 million due to lower revenue in its timber segment because of lower log production.

This article first appeared in The Edge Financial Daily, on September 17, 2014.