Dispute over KR Precision rights issue
October 4, 2000
MINORITY shareholders, led by Andy Delaney, yesterday threatened to take legal action against computer-parts manufacturer KR Precision Plc over allegations that the management might try to "walk away with the store".
This follows KR Precision's notification to the Stock Exchange of Thailand yesterday that it plans to make a rights issue of 253.63 million shares to raise the company's capital to Bt3.72 billion. The total proceeds will be about Bt1.01 billion, based on a rights issue of Bt4 a share.
Yesterday KR Precision, following a temporary halt in morning trading, was traded at about Bt8.6 a share. In March this year the company's stocks were traded at about Bt25 a share.
Delaney, a consultant who claims to hold about 250,000 shares in KR Precision, said he suspected that the massive recapitalisation might be part of an attempt by management to try to buy the company back at a cheap price before attempting to delist it or relist it on the US Nasdaq market.
However, the management of KR Precision, led by CEO Jime Steger and CFO Jake Vigoda, categorically denied the charges, saying that the two-to-one rights issue representeds a big step in the company's attempt to make new investments to upgrade its equipment.
They said the company would use the proceeds from the recapitalisation to purchase new equipment and upgrade its manufacturing facility in Wang Noi, Ayutthaya province.
"It's a significant move to upgrade our capacity, and we're excited about it," said Vigoda. He added that the company, which was still trying to turn its profits around, wais aiming for quarterly growth of 10 per cent.
Its major customers are Seagate and Quantum, making it vulnerable to sales fluctuations, according to an analyst. Seagate alone buys about 90 per cent of KR Precision's total sales, the analyst said.
A few months ago KR Precision completed its restructuring of syndicated loans of about US$38 million (Bt1.6 billion). Under the deal, Prudential Asset Management Asia agreed to inject $24.5 million into the company in return for a 40-per-cent stake.
KR Precision used the entire amount to pay off its syndication loan at a sharp discount, putting it in a debt-free situation.
Delaney said the company did not need new capital; rather it needed a new strategic partner to carry it forward. Since small investors have already lost money from the stock's tumbling, the massive recapitalisation will not only cost them more, it will also dilute the value of their stocks, he added.
He and other shareholders will bring the case to the attention of the Stock Exchange of Thailand and the Securities and Exchange Commission, he said.
Vigoda said Prudential Asset Management had supported this recapitalisation plan and was willing to subscribe to any leftover stocks from the rights issue.
The subscription period for the rights issue is Nov 27 to Dec 1 for a total of 236.40 million stocks. Another 17.22 million stocks will be reserved for warrant exercise. One warrant can be converted to one common stock for not less than Bt4.
KR Precision said it would hold a shareholders' meeting on Nov 6 to approve the capital-increase plan. Its share-registration book will be closed on Oct 17.
BY THANONG KHANTHONG