Share swap turns sour
Business & Markets 2013
Written by Fatin Rasyiqah Mustaza & Kathy Fong of theedgemalaysia.com
Monday, 02 September 2013 08:54
KUALA LUMPUR: The synergistic partnership between China Stationery Ltd (CSL) and Pelikan International Corp Bhd may not materialise.
CSL has been paring its equity interest in Pelikan, controlled by Loo Hooi Keat, selling below cost on the open market less than a year after the former had paid a premium to acquire a 9.79% stake.
According to filings with Bursa Malaysia, CSL has started selling down its equity interest since July. As at Aug 29, it was left with a 5.93% stake or 30.12 million shares in Pelikan, which operates in Europe.
The share swap deal between CSL and Pelikan raised eyebrows last year as loss-making Pelikan was valued at RM1 per share, a 36% premium to the market price of 73.5 sen then. Likewise, CSL’s desperate sale of Pelikan shares at falling prices currently also surprises many.
CSL had bought 50 million shares at RM1 each from Mahir Agresif (M) Sdn Bhd, PBS Office Supplies Holding Sdn Bhd and Persada Bina Sdn Bhd. Both Mahir Agresif and PBS are Loo’s investment vehicles, while Persada is jointly owned by Jason Young Cher Chiat and Mohd Yusoff Jaafar.
In return, the three vendors collectively received 47.16 million CSL shares at an issue price of RM1.06 each — which was the market price then.
CSL said the acquisition would immediately provide a pathway for both CSL and Pelikan to work together to grow the business, hoping to leverage on Pelikan’s presence in Europe to help it become a global player.
However, CSL’s move to dispose of its stake in Pelikan could be an indication that the Chinese firm no long believes in the strategic partnership with Loo, who bought into the German stationery group in 1996.
Pelikan’s share price has almost halved since the start of the year. The stock tumbled to an all-time low of 33.5 sen from 75 sen in early January. It closed at 35 sen last Friday, which was 65% below what CSL paid for in October last year. Dealers said CSL’s share sale had certainly accelerated the down trend of Pelikan’s share price.
Meanwhile, CSL’s share price is not performing well either. It is trading substantially below its initial public offering price of 95 sen. Its share price surged to a record high of RM1.78 in February last year. Based on its last Friday’s close of 21.5 sen, the stock has shed 77% against its issue price of RM1.06 for the share swap deal.
It is not known if Loo and the other vendors have sold their stakes in CSL. Their names were not on the substantial shareholder list as at May 8 (2013) in the latest annual report.
Interestingly, Loo who has been president and CEO of Pelikan since 1997 has begun to sell his direct and indirect stakes in the company since April last year, after Pelikan had incurred a net loss of RM88.42 million for financial year 2011 ended Dec 31 (FY11).
Loo’s interest in Pelikan was reduced to 13.59% as at Aug 26 from 15.84% in April. He is the second largest shareholder after Lembaga Tabung Haji, which holds 30.87%. ECM Libra Financial Group Bhd is also a substantial shareholder with a 7.08% stake.
Pelikan has been loss-making for the past two financial years. This explains the sharp fall of its share price.
It incurred a net loss of RM57.32 million for FY12.
Nonetheless, Pelikan posted a net profit of RM8.7 million for the second quarter ended June 30 compared with a net loss of RM2.7 million, or 0.56 sen per share, although revenue was lower at RM383.9 million versus RM427.7 million.
This article first appeared in The Edge Financial Daily, on September 02, 2013.