MPHB to buy Magnum for RM1.6b

KUALA LUMPUR: Multi-Purpose Holdings Bhd (MPHB) yesterday proposed to buy the remaining 49% equity stake in Magnum Holdings Sdn Bhd for RM1.637 billion.

The purchase consideration will be settled by 360.5 million new shares in MPHB plus RM809.2 million cash.

The share vendors are private equity fund CVC Asia Pacific Ltd’s wholly owned unit Asia 4D Holdings Ltd, which has 47% shareholding, and certain members of the management of Magnum that collectively hold 2% equity stake.

Upon completion of the acquisition, MPHB will once again wholly own the numbers forecast operator (NFO) and its steady cash flow. The exercise will effectively see the reincarnation of Magnum Corp Bhd, which was taken private three years ago at RM3.45 per share, in the form of MPHB.

The announcement confirmed a report by The Edge Financial Daily yesterday that MPHB would acquire the equity stake in Magnum held by CVC to facilitate the private equity fund’s exit.
MPHB will regain full control of
the NFO cash cow

The proposed acquisition price of RM1.637 billion effectively values Magnum at RM3.3 billion, compared with Berjaya Sports Toto Bhd’s market capitalisation of RM5.6 billion.

Magnum Corp was privatised by MPHB and CVC at RM4.9 billion. At that time, the NFO had RM2.7 billion debts, which was later paid off by selling off properties and landbank.

Investment analysts believe the proposed acquisition is a prelude to the listing of Magnum. Indeed, the group had earlier revealed such intention but did not disclose the timing. However, the group did not mention any initial public offer by Magnum in yesterday’s announcement.

In the announcement to Bursa Malaysia, MPHB said the proposed acquisition price was arrived at after taking in account, among others, the audited net assets of Magnum of about RM1.07 billion as at Dec 31, 2009, the nominal value of and outstanding interest accrued on the RCULS-C and the future earnings potential of Magnum.

MPHB explained that the proposed acquisition would make gaming its core business.

MPHB noted that the proposed acquisition was part of its balance sheet management, in respect of asset allocation.

“The focus of MPHB moving forward will be in the business of gaming and this presents an opportunity for rationalisation of the MPHB group’s non-core assets through a divestment programme to be initiated,” the group said.

Industry observer said the non-core assets are likely to be some landbank that MPHB had acquired from Magnum after the NFO was taken private in 2008.

MPHB yesterday told Bursa that it had entered into a MoU with Asia 4D and a separate MoU with certain members of the management of Magnum Holdings for the proposed acquisition.

Besides the 49% shareholding in Magnum Holdings, the proposed acquisition will also entail the purchase of RM669.79 million nominal value of redeemable convertible loan stock class C of Magnum (RCULS-C) from CVC and RM4.8 million nominal value of RCULS-C from the NFO’s management.

MPHB will also pay all accrued interest of the RCULS-C.

The proposed issue price of the new MPHB shares at RM2.30 each was arrived at after taking into consideration, among others, the current market price of MPHB.

Based on a five-day volume-weighted average market price (VWAMP) of RM2.51, the share price would represent a discount of 8.4%. The issue price of RM2.30 represents a discount of 3.8% to a 30-day VWAMP of RM2.39.

MPHB’s share price has soared 18.5% in the past three weeks to a historical high of RM2.68 on Jan 21 from RM2.26.

MPHB said Asia 4D would have a board representative in MPHB.

According to MPHB, CVC, which would receive 343.8 million shares, only intends to retain 160 million shares in MPHB and it would later place out the rest to third parties.

For 3QFY10 ended Sept 30, the NFO business contributed about 65% of MPHB’s pre-tax profit. The group generated net operating cash flow of RM525.3 million for the quarter.

As at Sept 30, MPHB had cash pile of RM764.7 million against long-term borrowings of RM1.85 billion.

MPHB said the proposed acquisition is expected to further improve and strengthen the group’s future profitability and cash flow position via the higher share of Magnum’s earnings and cash flows.

“The enlarged share capital following the issuance of the new MPHB shares will strengthen its balance sheet and improve its liquidity,” it said.

MPHB added that the proposed acquisition is also expected to widen the investor base appeal, including institutional investors, given the better clarity in MPHB’s core business.

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