Can-One revisits privatisation of Kian Joo Can Factory in Malaysia
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Can-One Berhad is revisiting the privatisation of Kian Joo Can Factory Bhd, in which it has a 32% stake, according to sources.
Only this time, Can-One's advisers are looking at enlisting the help of the Employees Provident Fund (EPF) to take private the largest can manufacturer in the country.
According to company executives, the EPF had in the past explored the possibility of increasing its equity interest in Kian Joo with the view of having a more meaningful stake in the company. But this did not materialise due to a spate of legal suits in Kian Joo.
However, with Can-One now firmly at the helm and the See family seemingly working well with the new major shareholders, the prospect of new legal suits arising is dim.
The EPF is a long-term shareholder of Kian Joo. Back in 1999, the pension fund held 16.6 million shares or 14.4% equity interest in the company. Nevertheless, it has pared down its stake in the can manufacturer over the years. Based on the latest filings with Bursa Malaysia, the EPF holds 44.54 million shares or a 10.03% stake in Kian Joo.
Can-One's entry into Kian Joo has not been an easy one. In February 2009, the former won the bid for a 32.9% stake in its largest competitor in a tender at RM1.65 per share.
However, the founders of Kian Joo — the See family — waged a legal battle in an attempt to stop the liquidation process after Can-One emerged as the buyer. It took three years before the lengthy legal battle was concluded, ending in favour of Can-One, which walked away with the stake at a price tag of RM241.1 million, equivalent to RM1.65 per share.
Notably, Can-One financed the acquisition entirely through borrowings. At that time, the loan taken was reported to have doubled the company's borrowings to RM467 million and caused its net gearing to hit a whopping 2.2 times.
In 2012, Can-One received RM18.27 million in dividends from Kian Joo, while the former's total interest paid as recorded in its 2012 annual report came to RM19.96 million. It is easy to understand why Can-One is keen to take Kian Joo private, as the latter is a dominant force in the aluminium can industry with a domestic market share of 70%.
Can-One is also keen to re-examine the privatisation of Kian Joo because the latter's profits have looked good in recent times. It recorded a net profit of RM30.43 million in the first quarter ended March 31 compared with RM27.29 million a year ago, while revenue gained 12.69% to RM300.62 million from RM266.77 million.
