By S BIRRUNTHA
THE share price of Paragon Union Bhd closed at a high of RM1.75 last week despite the company’s recent mandatory general takeover offer for the remaining shares at 55 sen per share.
The takeover offer was issued by its controlling shareholder, AKK Capital Sdn Bhd, after emerging as the largest shareholders with a 60.41% stake in the company.
With the new shareholder expected to keep the listing status of Paragon intact, the share price action suggests minority shareholders’ expectations of the new controlling stake could change the fortunes of the company in a meaningful way.
Paragon’s price action mirrors to some extent what transpired at Vivocom International Holdings Bhd, which rallied after the new shareholder emergence and decided to keep the developers listing status.
Vivocom hit a high of RM2.05 before retracing to close at 89 sen last Thursday.
At the close last week, Paragon’s market capitalisation stood at RM115.8 million.
Paragon manufactures and trades commercial carpets and rugs, as well as automotive carpets from its base in Cheras, Selangor.
The company’s share price rallied from 29.5 sen in mid-October last year despite being loss-making as at Sept 30, 2020.
For the past five financial years (FYs), the company recorded losses for two years, namely RM1.04 million in FY17 and RM1.48 million in FY18.
On Jan 22, Paragon announced it had received a notice of unconditional mandatory takeover offer from AKK Capital to acquire all the remaining ordinary shares at 55 sen each.
This was followed by the share sale agreements between AKK and five vendors to acquire a total of 39.98 million Paragon shares, equivalent to a 60.41% equity interest in Paragon for RM21.99 million or 55 sen per share.
The carpet maker said the total consideration will be satisfied entirely in cash.
Of the five vendors, AKK will acquire a 48.26% stake from Asia Avenue Sdn Bhd, 5.18% from Tan Choon Hock, 4.21% from Kong Say Thor, 1.48% from Lee Poh Ting and 1.28% from Lee Poh Yee.
Asia Avenue was Paragon’s largest shareholder prior to this. Koon Hoi Chun is the sole shareholder and director of AKK, according to Paragon’s exchange filing.
All valid acceptances of the offer by shareholders are irrevocable, Paragon’s exchange filing on Jan 22 noted.
In October last year, Paragon received an unusual market activity query from Bursa Malaysia Securities Bhd after its share price surged as much as 67.12% or 61 sen in one day.
The group stated that it has been approached by certain interested parties who had expressed interest in acquiring the company’s shares.
“However, the approach and discussion at this juncture is at a preliminary stage and no agreement and/or conclusions have been made, reached or firmed up in respect of the discussion so far.
“The director/major shareholder will make the necessary disclosure and an announcement to Bursa Securities in the event any agreement is concluded from the approach and discussion, if required,” it said in an exchange filing.
For its third quarter ended Sept 30, 2020, Paragon posted a net loss of RM1.19 million, while its revenue plunged to RM12.33 million.
The group attributed the losses to the decreased sales in both the automotive sector and commercial sector as a result of the Covid-19 pandemic, as well as the Movement Control Order (MCO) and Enhanced MCO imposed by the government.
For the cumulative nine months, net losses stood at RM5.4 million on the revenue of RM26.41 million.
Moving forward, the group anticipates its revenue will be in the recovering stage, but at a slower pace, as the market would likely be experiencing a cautious attitude and anticipated an economic slowdown as a whole.