Legal Battle Over KNM Group’s German Subsidiary Sale
Bursa Malaysia Securities Bhd (Bursa Securities), the country's stock market regulator, has taken legal action to prevent an extraordinary general meeting (EGM) from proceeding. The EGM, which is scheduled for October 30, aims to approve the sale of KNM Group Bhd’s German subsidiary, Deutsche KNM GmbH (DKNM). This move has sparked a significant legal dispute between Bursa Securities and several key stakeholders involved in the transaction.
In a recent filing with the bourse, Bursa Securities revealed that it has initiated an originating summons at the Kuala Lumpur High Court. The legal action targets MAA Group Bhd, CIMSEC Nominees (Tempatan) Sdn Bhd, KNM Group Bhd, and its subsidiary KNM Process Systems Sdn Bhd. The regulator is seeking a court order to stop MAA and CIMSEC Nominees from convening the EGM to discuss or vote on the proposed special resolution regarding the disposal of DKNM.
MAA, which holds a 19.37% stake in KNM, is pushing for the EGM to take place on October 30. The group is led by Tunku Yaacob Khyra, a member of the Negeri Sembilan royal family. MAA’s main objective is to secure shareholder approval for the sale of Borsig GmbH, a subsidiary of DKNM, to Japan’s NGK Insulators for €270 million (RM1.32 billion).
This transaction is crucial for KNM, a cash-strapped oil and gas services provider. The company is relying on the proceeds from the sale to reduce approximately RM1 billion in debt and free up RM100 million in working capital. However, the legal challenge from Bursa Securities could delay or even block the deal.
The court case involving Bursa Securities will be heard on October 29, just one day before the scheduled EGM. This development follows a warning issued by Bursa Securities to MAA on October 23, stating that holding a shareholder vote on the DKNM disposal would violate listing rules.
According to Bursa Securities, the proposed sale of DKNM is classified as a "major disposal." This classification requires the appointment of a main adviser and an independent adviser, a valuation of DKNM, and the distribution of a detailed circular to shareholders for regulatory review. Failure to comply with these requirements could result in severe consequences for KNM.
In a rare “regulatory advisory,” Bursa Securities emphasized its commitment to enforcing the Main Market listing requirements. It stated that it would not hesitate to take appropriate action if any breaches occur.
KNM’s shares have been suspended from trading since October 13 after Bursa Securities rejected its regularization plan. The regulator cited the company’s failure to demonstrate its ability to sustain its business operations as the reason for the rejection. The stock was initially slated for delisting on November 5, but KNM managed to delay this by appealing the decision on October 7.
In an unexpected move, KNM announced on Monday that it will relinquish its listing status to facilitate the disposal of DKNM. The company claimed that this step is essential for its turnaround strategy. It argued that the timeline of the regulatory processes involved in pursuing the appeal could jeopardize the completion of the sale.
As a Practice Note 17 (PN17) status oil and gas services provider, KNM has confirmed that its shares will be delisted on November 5. This decision marks a significant shift in the company’s strategy and highlights the challenges it faces in navigating the complex regulatory landscape.