Potential MGO by EPF to MRCB

Written by Yong Min Wei
Friday, 06 November 2009 11:31

KUALA LUMPUR: The Employees Provident Fund Board (EPF) is within reach to extend a mandatory general offer (MGO) to MALAYSIAN RESOURCES CORP [] Bhd (MRCB) with the latter’s proposal to undertake a rights issue to raise RM566 million.

EPF holds approximately 30.6% equity interest in MRCB comprising 277.96 million shares as at Nov 3, 2009. Should it subscribe to the excess rights shares in MRCB and as a result raises its interests to more than 33%, the EPF would be obliged to make an MGO for the remaining shares in the company.

“EPF has confirmed that, to the extent applicable, it will at all times observe and ensure compliance with the provision of the Code (Malaysian Code on Take-Overs & Mergers 1998),” an MRCB filing on Bursa Malaysia yesterday disclosed.

MRCB announced yesterday that it is proposing to undertake a renounceable rights issue of new shares of RM1 each to entitled shareholders to raise gross proceeds of up to RM566 million. The company did not state the rationale for the rights issue, but speculation is that it is raising fresh capital to undertake new property projects, or to participate in developing the government’s land earmarked for disposal.

However, while the intended gross proceeds of RM566 million have been determined upfront, the basis for the rights issue and issue price for the rights shares has not been fixed.

“The board wishes to have more flexibility in respect of pricing of the rights shares, after taking into consideration recent market conditions and the interest of MRCB and its shareholders,” said MRCB, citing that the details will be announced closer to the implementation of exercise.

Nevertheless, it stated that the issue price of the rights shares would be at a discount of up to 15% to the theoretical ex-rights price of MRCB on the price-fixing date, but in no event be lower than the par value of its shares of RM1 each.

MRCB closed two sen lower at RM1.39 yesterday. It currently has total issued share capital of RM907.6 million made up of 907.6 million shares of RM1 par each.

MRCB said EPF has declared that there are no parties acting in concert with it in the event that the potential MGO is triggered.

MRCB added that EPF, which is the substantial shareholder of MRCB, has provided a written irrevocable undertaking to subscribe in full its legal entitlements under the proposed rights issue as at the entitlement date to be determined by the board.

According to MRCB, any unsubscribed rights shares shall be offered to other entitled shareholders and/or their renouncee(s) under the excess rights shares application. It is the intention of the board to allocate the excess rights shares in a fair and equitable manner on a basis to be determined by the board and announced later by the company.

Other than the provident fund, the other substantial shareholders that have about 5% stake in MRCB are JP Morgan Chase & Co with 5.1% and Merrill Lynch & Co with 4.91%, according to Bloomberg yesterday.

Of the 10 stockbroking firms polled on Bloomberg, seven have recommended buys, with two holds and one sell on MRCB.

MRCB’s share price shed two sen yesterday to close at RM1.39 with 8.1 million shares traded. The stock had touched a 52-week high of RM1.51 on Aug 12, 2009 and a low of 62.5 sen on Nov 21, 2008.


This article appeared in The Edge Financial Daily, November 6, 2009.