Sources say a well-connected group from Sarawak is looking to inject RM200mil worth of oil and gas fabrication assets into the loss-making bottled water company.
The group has been on the look-out for a shell company for some time and Bio Osmo, which is debt free after having undergone a recent restructuring exercise, fits the bill.
The group from Sarawak, that is close to the state government, has been on friendly terms with Bio Osmo’s existing owners for some time, says the source.
In January this year, Harzani Azmi, the managing director of Tanjung Offshore Bhd emerged as a substantial shareholder of Bio Osmo. Tanjung Offshore is still without a core business after it sold its offshore supply vessel business to Ekuiti Nasional Bhd in July 2012 for RM220mil.
Harzani’s emergence spurred speculation that the loss-making bottled water manufacturer was looking to enter the oil and gas sector.
Harzani, via private company Al Maurid Resources Sdn Bhd, acquired a 28% stake in Bio Osmo after taking up 99 million shares in the company.
The fabrication assets that could be injected into Bio Osmo consists mainly of a marine engineering dockyard and its related facilities that is sitting on a 20-acre site in the Sejingkat area in Sarawak, says the source.
Apart from the usual repair and maintenance business, this dockyard has substantial fabrication facilities. It has a capacity of 8,500 tonnes, but upgrading works will double this capacity by next year.
For now, the Sejingkat dockyard (pic) is profitable but can do with further upgrades to take on bigger jobs.
“If the injection of the dockyard into Bio Osmo materialises, it will provide a base for further upgrades, allowing it to bid for better jobs, says the source.
If Bio Osmo acquires the fabrication business through the reverse takeover exercise, it will join the ranks of other listed fabrication oil and gas players such as TH Heavy Engineering Bhd and Muhibbah Engineering Bhd.
It will have the Petronas licence which the other listed fabricators own and something that allows them to bid for jobs tendered by the national oil corporation.
Nevertheless, sources say the Sejingkat dockyard, which was previously owned by the Sarawak Economic Development Corp (SEDC), has been profitable as it stands and undertook an internal restructuring recently.
In that exercise, it is learnt that the SEDC sold more than a 50% stake of the dockyard to the group from Sarawak at a price earnings ratio of some four times.
“Via a share swap exercise, the SEDC and Sarawakian shareholders are looking to inject the dockyard into Bio Osmo and eventually end up with roughly 30% and 40% stake respectively. Existing shareholders will own the remaining 30%,” says the source.
This would indicate that a massive rights issue for Bio Osmo is on the cards. The exercise will likely increase Bio Osmo’s paid-up capital by another 1 billion shares.
“Free warrants will likely be given to shareholders to sweeten the deal. Kenanga Investment Bank Bhd has been appointed as the investment banker for The cleanup in Bio Osmo has been going on over the past one year.
Last year, Bio Osmo sold 115 million shares via a private placement to raise funds and pay off its RM65mil debt owed to Bank Kerjasama Rakyat Malaysia Bhd. This was where Harzani came in, and took up 99 million Bio Osmo shares.
Bio Osmo is now in the process of disposing of its current water business and the price it is looking for is some RM20mil. It is also in the midst of undergoing a private placement of 45 million new shares to raise RM8mil. With the completion of this placement exercise, Bio Osmo’s share capital will increase to 502.44 million.
Apart from Harzani, the other substantial shareholders include Perbadanan Nasional Bhd with a 9.13% stake and Idaman Capital with a 6.77% stake.
Boardroom changes appear to be taking place in the company. In February, its executive director Yang Ching Kar resigned to pursue personal career opportunities. He was replaced by alternate director Lee Choong Chong. Harzani will emerge as a director once the asset injection into Bio Osmo is completed, and he will remain as the managing director of Tanjung Offshore.
Meanwhile Shahrizal Hisham Abdul Halim, who is also a 1% shareholder in Al-Maurid, was appointed as executive director. The company has been without a managing director since Datuk Seri Krishna Kumar Sivasubramaniam resigned in June 2012.
Bio Osmo’s water bottling business has been making losses for the past five years.
Bio Osmo sold 115 million shares via a private placement to raise funds to pay off its RM65mil debt it owed to Bank Rakyat.
With the completion of the restructuring exercise in November last year, the stock jumped from the 10 sen level to a hit a high of 25 sen in Jan 7 this year. It is now hovering at the 15.5-sen level.
For the year ended Dec 31, 2013, Bio Osmo recorded a net loss of RM15.86mil from a previous loss of RM12.38mil. This was on the back of RM15.86mil revenue.
The losses incurred by the group was predominantly due to the impact of a RM13.58mil one-off non-cash adjustment.