EPF trims stake in KNM

Written by Jose Barrock
Wednesday, 31 March 2010 22:45

KUALA LUMPUR: The Employees Provident Fund (EPF) has been trimming its stake in oil and gas counter KNM GROUP BHD [] over the past week.

According to filings with the local bourse, the provident fund hived off about 46.3 million shares in KNM on March 25 and 26, reducing its stake to 10.77% comprising 425 million shares.

In an earlier filing on Tuesday, March 30, EPF's stake was reduced to 11.97% or 472.35 million shares after selling about 13 million shares. As at March 23, the EPF held 12.44% of KNM.

What has triggered this selling by the EPF, which is KNM's second largest shareholder, is not clear, but KNM has been hogging the limelight lately.

Recently, a RM3.5 billion or 90 sen per share offer for the assets of the company was made by a consortium made up of Lee Swee Eng, KNM's managing director and controlling shareholder, private equity firm Mettiz Capital Ltd which is the vehicle of individual Michael Tang Vee Mun and GS Capital Partners VI Fund LP, a unit of Goldman Sachs. Lee's vehicle in the exercise is BlueFire Capital Group Ltd (Bidco).

However, the due diligence was concluded with a whimper rather than a bang on March 22. In its announcement, KNM said: "The board of directors of KNM has not extended Bidco's exclusivity period. However, Bidco is still in continued discussions with the company and the parties have agreed to endeavour to conclude discussions by April 16, 2010."

This announcement raised doubts, as to whether the acquisition of KNM's assets will actually go through at the stipulated 90 sen per share offer. To make matters worse, KNM announced its financial results for FY09 in the period when the due diligence was being done.

While the company was profitable for FY09 with a net profit of RM170.7 million on RM1.8 billion revenue, KNM's fourth quarter results came as a shock as it incurred a loss of RM31 million from RMRM398.6 million revenue.

According to its notes, KNM said the losses were a result of the global economic slowdown, revaluation of PROPERTIES [], provision for foreseeable losses and higher operating costs.

There has been talk of EPF being offered an option to convert its existing stake in KNM to shares in the new company, which will own KNM's assets, making EPF's sell down in KNM surprising.

KNM has been trading between 72 sen and 77 sen since March 22. It closed at 72 sen on Wednesday, slipping one sen.