German billionaire Andreas Heeschen and the Malaysian tycoon seem to be setting themselves up for a corporate battle. KNM CEO/MD pens a lengthy statement on tussle.
by RAVINDRASINGHAM BALASINGHAM
ON 5 September 2023, Mr. Andreas Heeschen served notice to KNM Group Bhd requesting an EGM for the removal of the current Board of Directors, and that it to be replaced by a new Board of Directors and Management consisting of himself and representatives of his party, triggering a sudden takeover and a Boardroom tussle.
KNM’s current Board of Directors and Management was established on 8 November 2022 following the previous Management’s failure to effectively implement the necessary monetization of its assets.
We have gone to great lengths to implement a proper professional approach to the whole monetization exercise, and we are doing so, with absolute transparency. Our commitment and immediate course of action has been greatly appreciated and valued by our existing creditors. With this unprecedented level of engagement and extensive efforts in executing our win-win strategy, we have won over the majority of our creditors, and they have, either explicitly or implicitly continued to support the current Management of KNM Group Bhd.
Even unsecured creditors who have petitioned KNM Group Bhd were engaged and were kept informed by the current Management; such has been the extent of our efforts. At the recent town hall meeting, where RM1.024 billion of the RM1.167 billion of the creditors gathered, continued support is intact for the extension of the restraining order until December 2023.
The current Board of Directors and Management feel that with the support of majority of the RM1.167 billion external creditors, there is a shared vision of KNM Group Bhd; i.e., to pare down the debt in an orderly monetization exercise whilst simultaneously achieving a restructured KNM Group with a sustainably profitable future for the shareholders is achievable. The Management is continuously finding ways to speed up the monetization process.
This action to acquire KNM Group Bhd comes as no surprise because, truthfully, the Group’s shares are hugely undervalued. Even in terms of book value, its NTA is 21 sen per share because KNM Group Bhd holds within it the Borsig Group, the renowned company with an attractive market valuation, in excess of €300 million (RM1.5 billion).
Notwithstanding this, FBM Hudson too, when it is turned around will also be of immense value. Unfortunately, under the current circumstances, we lack the resources necessary to fund such a turnaround. As such, a disposal was necessitated at the best price given FBM Hudson Group’s current circumstances.
Mr. Heeschen has had a keen interest in the Borsig Group and FBM Group and has made unsuccessful acquisition attempts in the past, even as late as last year. He has in-depth knowledge of the value and potential of Borsig and FBM Hudson, which is not surprising as one of his suggested directors to replace KNM Board of Directors is a Mr. Flavio Porro, who was an executive director of KNM Group Bhd and the CEO of FBM Hudson Group until December 2022, and who also spearheaded and negotiated the failed attempts to sell the Borsig Group.
Why else would Mr. Heeschen pursue the acquisition of KNM Group Bhd, a PN17 company, which has a restraining order in place, in the middle of Section 366 of a comprehensive restructuring exercise, and an external debt of RM1.167 billion? This sudden interest should in fact strongly embolden the current shareholders of the massive potential value within KNM Group Bhd. As I have said in the past, KNM Group Bhd is in this position because of liquidity issues and an over geared position, which the current Board and Management are resolving. The most serious element is of course the level of debt, which will be resolved once the debts of the Group are pared down with the ample resources from the asset monetization exercise we are implementing.
Typically, company auditors come about scrutinizing once annually. In the case of KNM Group Bhd, we have had constant ongoing performance reviews by the majority of the creditors since December 2022. The fact that these creditors continue to support the efforts of the Board and Management of KNM Group Bhd is testimony of their vote of confidence on the strategies that are being implemented by the current Board of Directors and Management under the leadership of Y.M. Tunku Dato’ Yaacob Khyra as the controlling shareholder and Chairman of the Group. Also, we are pleased that KPMG has, after their internal appraisal, agreed to return as the auditors of KNM Group Bhd.
Understandably, the immediate worry about an abrupt attempt to takeover can and will create a disturbing disquiet amongst creditors, who have been very supportive of us thus far. Such unease could trigger serious actions from external creditors like Asian Development Bank (CGIF) and TA/Danos, endangering the good working relationship that the current Board of Directors and Management has, and potentially the collapse of all progress made thus far. We have kept the creditors informed and have assured them that Y.M. Tunku Dato’ Yaacob Khyra is very serious about his controlling stake in KNM Group Bhd and if necessary, he will not hesitate to increase his stake.
We have an ad-interim Restraining Order (RO) court hearing coming up on the 20 September 2023 and we are planning to obtain an extension by showing the court that we have been doing our utmost given the unique challenges of KNM Group Bhd and that we have the support of the majority of the creditors for the RO. The current team has restructured the Group and put in place proper professional infrastructure to monetize the various assets to achieve the debt repayment targets. Admittedly, it is a difficult task as the assets are located in various overseas jurisdictions and some of these assets are not in the best condition due to the state of financial distress within the Group over the last few years. The potential plan to replace the current Board of Directors and Management of KNM Group Bhd could impact the court’s decision solely because this creates doubt on the current draft Scheme of Arrangement and as previously occurred, lead to another postponement of decision on this Restraining Order by the court, until after the requisitioned EGM.
KNM’s Board of Directors are united in its purpose and dynamic approach. The Management team and I remain very grateful and appreciative of the Board’s hard work in supporting us in raising KNM Group Bhd to its full potential. More immediately, under the professional leadership of YM Tunku Dato’ Yaacob Khyra as its Chairman, the current Management have been instructed to do its utmost to defend and uphold the best interest of all stakeholders even if it warrants that the matter be taken to court. Given the issues highlighted, we are in discussion with our lawyers, advisors, and forensic specialists on the appropriate course of action.
It also seems rather dubious that just recently, Y.M. Tunku Dato’ Yaacob Khyra, the companies KNM Group Bhd and MAA Group Bhd and be default, members of the respective Board of Directors of both companies were made victims of a false attempt to smear their good name by means of a fake whistleblowing publication which the Malaysian Communications and Multimedia Commission (MCMC) has, after its investigation, judged as unlawful.
KNM Group Bhd stock is held by a wide base of public and retail investors. As expected, there is extensive activity on KNM Group Bhd shares. The shareholders of KNM Group Bhd will have to choose between the current Board of Directors and Management, who have been doing our utmost to maximize recovery on the assets of KNM Group Bhd and have proven ourselves by gaining the trust of the majority of our creditors, versus Mr. Heeschen with his new Board of Directors and Management. Is this attempted takeover of KNM Group Bhd by Mr. Heeschen a cheaper way to acquire Borsig Group and FBM Group? Should this be the case, the shareholders and creditors of the KNM Group Bhd stand to lose all compared to our competitive monetization process.
With all the excitement over the above takeover and the potential Boardroom tussle, we must not forget that stock market performance will eventually come down to the fundamentals of a Company. As such, I wish to highlight that KNM Group Bhd announced a total comprehensive income for the quarter ended 30 June 2023 of RM19.8million (versus a total comprehensive expense of RM29.7million previous quarter) and turnover of RM342.3 million (versus RM 67.7 million previous quarter).
For the period 12 months ended 30 June 2023, the total comprehensive expense was RM93.1million (in the previous year, for the 18 months period ended on 30 June 2022, the comprehensive expense was RM1,030 million) and the turnover was RM1.171 billion (the previous year, the turnover for the 18 months period ended on 30 June 2022 was RM478.7 million). The current quarter and year to date figures are yet to be audited. More details of these results can be obtained from our Bursa announcement in the latest quarterly announcement.
Of course, significant challenges still remain, and the prospect of a takeover and Boardroom tussle adds to this. Yet as one can see, the circumstance we’re in today is testament to the Group’s high future prospects, made more obvious (and in no small part) by the current Board of Directors being challenged. Regardless, we ask that all stakeholders act in the best interest of the Group, safeguarding the Group’s accomplishments thus far, and that prospects for a highly sustainable business future remain firmly secure.
(Ravindrasingham Balasingham is the CEO/MD of KNM Group Bhd. This statement was dated Sept 8, 2023)