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Aliran Ihsan price surge leads to talk of takeover (AIRB-8516)
By C.S. TAN
PETALING JAYA: Shares in Aliran Ihsan Resources Bhd (AIRB) rose 36 sen to RM1.09 while its loan stock, AIRB-LA, climbed 10.5 sen to 99.5 sen in active trading yesterday.
That led to market talk the company could be taken private by its major shareholders, which are reportedly linked to Tan Sri Syed Mokhtar Al-Bukhary.
AIRB is an attractive asset to take private as it generates operating cashflow of about RM50mil a year, holds cash of over RM68mil and has virtually no borrowings. In spite of such favourable features, AIRB is usually thinly traded as a penny stock.
The company owns water-supply concessions in Johor through 49%-owned Equiventures Sdn Bhd and wholly-owned Southern Water Corp Sdn Bhd.
Equiventures operates two water treatment plants that supply the Johor Baru area, while Southern Water operates 14 water-treatment plants that supply the districts of Muar, Batu Pahat, Segamat and Kluang.
As a group, AIRB water-treatment plants produce about 70% of the treated water in the state.
The other concessionaire of water supply in the state is SAJ Holdings, a subsidiary of Ranhill Utilities Bhd.
There were discussions between AIRB and the state government over the latter’s proposal to purchase the water-supply concessions, according to reports. There was no conclusion to those negotiations so far.
A full takeover of AIRB should not be very difficult, as its three substantial shareholders – all companies – owned 71.4% of its issued capital base of 209.4 million shares.
In addition, however, AIRB has fairly substantial loan stocks outstanding.
The largest holders of its 55.8 million loan stocks are Public Enhanced Bond Fund (holding 18.7% of the loan stocks), PB Fixed Income Fund (17.9%) and Public Bond Fund (17.9%).
The loan stocks are convertible into AIRB shares at a ratio of one-for-one and will not expire until 2011.
In addition, the loan stocks are redeemable at RM1 each and are entitled to a net dividend of 5 sen a unit until their expiry.
In a general offer, these loan stocks can be converted into shares and tendered as acceptances for the offer.
The possibilities for the price action yesterday range from an impending offer from existing major shareholders to buy all the shares, to an offer to buy all of AIRB’s assets and liabilities by SAJ or Johor state government.