UMW proposes rights issue

> Aims to raise up to RM1.1 billion to finance takeover of MBM Resources

PETALING JAYA: UMW Holdings Bhd is proposing a rights issue exercise to raise up to RM1.1 billion to finance its takeover of MBM Resources Bhd.

It told Bursa Malaysia that proceeds from the rights issue of new shares will be used to primarily repay a bridging facility to be obtained by the group to finance the proposed acquisition of all MBM Resources shares. They will also be used for working capital of the enlarged UMW group.

Last Friday, UMW made a conditional offer to Med-Bumikar Mara Sdn Bhd and its wholly owned subsidiary Central Shore Sdn Bhd (CSSB) for a collective equity interest of 50.07% in MBM Resources for RM501 million or RM2.56 per share.

If the offer is accepted, UMW will be obliged to extend a mandatory offer (MO) and it does not intend to maintain the listing status of MBM Resources.

UMW also made a conditional offer to PNB Equity Resource Corporation Sdn Bhd (PERC) for its 10% equity interest in Perodua at a total price of RM417.5 million or RM29.80 per share.

The offer will be satisfied via the issuance of 49.26 million new UMW shares at an issue price of RM6.09 and RM117.5 million cash, which will be funded via internally generated funds.

Upon completion of the acquisitions and assuming full acceptance of the proposed MO, UMW’s effective interest in Perodua will increase from 38% to 60.6%, which will further increase to 70.6% after the completion of the proposed Perodua acquisition.

However, UMW stressed that the rights issue will only be undertaken if the offer for MBM Resources is accepted by Med-Bumikar and CSSB respectively, and the proposed MBM Resources acquisition is completed together with the implementation of the proposed MO.

Hong Leong Investment Bank Research opined that the minority shareholders of MBM Resources should not accept the expected upcoming MO as the offer price is unattractive.

“We are negative on the exercise, as the offer of RM2.56/share is lower than our existing target price of RM2.70/share, a 20% discount to our estimated SOP (sum-of-theparts) of RM3.38/share.”

UMW’s share price gained 14 sen or 2.2% to close at RM6.49 yesterday, while MBM Resources was up 2 sen or 0.8% to RM2.45.