CCM to demerge from CCM Duopharma

Proposed exercise part of plan to improve capital structure

Chemical Company of Malaysia Bhd (CCM) will raise funds and demerge from its pharmaceutical unit, becoming the latest group of companies under Permodalan Nasional Bhd’s (PNB) stable to undertake a restructuring.

PNB owns 70% of CCM, which, in turn, has a 73.4% stake in CCM Duopharma Biotech Bhd.

CCM said yesterday the proposed corporate exercise is part of the plan to improve its capital structure. The move, it said in its filings with Bursa Malaysia, is expected to increase its earnings per share and net asset value.

Under the plan, CCM is raising up to RM257.6mil through a private placement of up to 10% of its share capital and the disposal of three parcels of land measuring 70.93 acres in Shah Alam, Selangor.

Proceeds from the fundraising and disposal of land will be used to repay its borrowings.

CCM will distribute its entire 73.4% stake in CCM Duopharma to its shareholders, a move that will see the demerger of the two companies.

The company has announced that it will consolidate three CCM shares into one.

Trading in the shares of CCM and CCM Duopharma will resume today after being suspended yesterday.

CCM’s shares were last traded at RM1.69, while CCM Duopharma’s shares were last traded at RM2.11.

In its filings with Bursa Malaysia, CCM said it would first complete its proposed private placement by October 2017 before the other corporate exercises.

CCM’s proposed placement will entail the issuance of up to 45.46 million new shares, or 10% of its share capital, to investors to be identified later.

The company said it expects to raise up to RM67.6mil from the exercise, and the proceeds would be used to finance working capital and pare down bank borrowings.

As for the proposed distribution and capital reduction exercise, CCM said it would enable its entitled shareholders, including PNB, to participate directly in the equity of CCM Duopharma at no cost.

“With direct ownership in chemical and polymer coating, as well as the pharmaceutical company following the completion of the proposed distribution and capital reduction, the entitled shareholders of the company can manage their investment exposure or rebalance their portfolio in each of these businesses independent of each other according to their individual investment objectives,” CCM said.

“As the purpose of undertaking the internal reorganisation is to facilitate the proposed distribution and capital reduction, CCM will seek an exemption from the Securities Commission from the obligation to undertake the mandatory offer,” it said.

The proposed distribution and capital reduction, and share consolidation exercises are expected to be completed by January 2018.

Upon completion of the proposed place- ment, proposed distribution and capital reduction exercise, PNB’s shareholding in CCM Duopharma is expected to increase from zero to at least 47.17%, assuming no CCM shares are subscribed by PNB under the proposed placement. (see chart)

Meanwhile, CCM said its proposed land disposal is expected to be completed by March 2018.

The group has proposed to sell three parcels of leasehold land in Shah Alam, measuring a total of 70.93 acres, to fast-moving consumer goods company GBA Corp Sdn Bhd for a cash consideration of RM190mil.

The disposal consideration represents a discount of approximately 2.2% to the latest audited net book value of the Shah Alam land as at Dec 31, 2016.

CCM said the proceeds raised from the land sale would be used to reduce its borrowings.

CCM Duopharma is involved in the development, manufacturing and marketing of generic drugs and branded pharmaceutical products.

The company has a wide range of products in the form of tablets, capsules, syrup, oral antibiotics, creams, hemodialysis solutions, sterile irrigation solutions, sterile powder injectables, small volume injectables, dental cartridges and eye drop preparations.

CCM shifted its core business from the production and distribution of fertilisers to manufacturing pharmaceutical products last year. The change in the core business contributed to losses in the previous financial years ending 2014 through 2016.

CCM’s exit from the fertiliser business was completed last year.