Tuesday, February 9, 2010

Goldman Sachs arranging funds for KNM takeover

KNM Group Bhd (7164), an oil and gas services provider, says Goldman Sachs (Singapore) Pte Ltd will be arranging debt and equity financing for its founder's RM3.6 billion takeover bid.

Bluefire Capital Group Ltd, a company controlled by KNM founder and managing director Lee Swee Eng, said last week that it wanted to work with two other firms in buying KNM's entire business for 90 sen a share.

Lee owns 24 per cent of KNM.
Its international adviser for the deal is Goldman Sachs, it told Bursa Malaysia last Thursday, providing little other information. The stock exchange later asked it to furnish more details on the buyout.

Bursa Malaysia wanted to know, among other things, how Bluefire planned to finance the deal as well as more information on the two firms Bluefire would be working with, namely GS Capital Partners VI Fund LP and Mettiz Capital Ltd.
KNM, in a reply late yesterday, said it had engaged Goldman Sachs as its adviser, arranger and manager for equity and debt financing on the deal.

"Goldman Sachs is prepared to arrange such financing, subject to satisfactory due diligence and agreeing terms," it said.
GS Capital Partners, a US$20.3 billion (RM70 billion) private equity fund of the Goldman Sachs Group Inc, and Mettiz Capital are potential providers of equity finance, it added.

It did not provide information on Mettiz Capital. On why Bluefire was making the takeover offer, KNM said it was because the company, which makes processing equipment for the oil and gas, petrochemical and mineral industries, would require more money and would have to gear up further to finance its restructuring and improve its position in the market.

As such, Bluefire intended to tap the funding resources and financial strengths of its equity partners.
Bluefire Capital, which currently has no equity interest in KNM, has yet to say if it intends to keep KNM listed, it added.

Analysts deemed the offer price of 90 sen "fair", but had been concerned as to how Lee would finance the deal given that he had previously made the same move before, only to be frustrated by the lack of available funds.

"We suspect he may be taking this opportunity to buy back the business at an attractive price, especially with the expected depressed performance in the coming quarters, with the possibility of selling it to other potential buyers at a higher price in future," OSK Research said in a note to clients last week.

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