KUALA LUMPUR (May 28): MPHB Capital Bhd (KL:MPHBCAP) said on Tuesday its controlling shareholder and chairman Tan Sri Surin Upatkoon plans to take the credit services provider private through a selective capital reduction totalling RM748.11 million.

Entitled shareholders will receive RM1.70 per share under the capital repayment proposed by Upatkoon and his family, who together control 43% of MPHB, according to a statement.

The offer price represents an 8.3% premium to MPHB’s closing price of RM1.57 on Monday, and a 30.8% premium to the prevailing three-month volume-weighted average price of RM1.30.

The board will deliberate on the proposed capital reduction and decide on the next course of action, MPHB said.

Under the exercise, Upatkoon is offering a capital reduction and repayment of RM1.70 apiece on 440.07 million shares, or a 62.68% stake, not held by his vehicles Case Management Sdn Bhd (CMSB), which owns a 32.92% stake, and MWE Holdings Sdn Bhd (4.4% stake).

As the capital repayment totalling RM748.11 million involves a sum higher than MPHB’s share capital of RM725.09 million, a bonus issue of 146.06 million shares by way of capitalising RM123.02 million of the group’s retained earnings is proposed.

The bonus shares will not be credited to entitled shareholders and will be cancelled under the proposed capital reduction and repayment to be undertaken subsequently.

“The proposed share capital reduction and repayment is expected to be funded via MPHB’s internally generated funds or borrowings to be obtained,” the offeror said. As at end-March 2024, MPHB had cash and bank balances amounting to RM66.28 million and current investment securities amounting to RM591.42 million.

Following this, to streamline MPHB’s capital structure, the group will cancel 161.99 million shares and all treasury shares held by CMSB and MWE for no consideration, resulting in CMSB remaining with 88.22 million shares (88.22% stake) and MWE with 11.78 million shares (11.78% stake).

Upatkoon does not intend to maintain the MPHB’s listing status on the Main Market of Bursa Malaysia.

Speaking on the rationale for the privatisation, Upatkoon said MPHB’s listing status brings minimal benefit to the group and its shareholders as it has not undertaken any fundraising activity from the capital market over the past decade.

He added that taking MPHB private will provide the group greater flexibility to develop its existing business without regulator restrictions to create an efficient operating structure and improve its utilisation of resources, prospects and future growth.

Since the disposal of MPHB's remaining 51% stake in MPI Generali Insurans Bhd to Generali Asia for RM522.06 million back in August 2022, the group operates in three main business segments, namely credit, investment and hospitality.

Excluding the RM185.41 million one-off gain from the disposal recognised in FY2022, MPHB’s net profit rose 18% to RM25.25 million versus RM14.62 million a year earlier, while revenue dropped 40.8% to RM39.22 million from RM66.24 million previously.

Of the remaining three business segments, Upatkoon highlighted that MPHB’s credit segment remained the only profitable segment in FY2023 with a profit before tax of RM43.4 million, while the investment segment suffered a loss before tax (LBT) of RM10.77 million and the hospitality segment logged an LBT of RM1.08 million.

Shares of MPHB closed six sen or 3.8% higher at RM1.63 on Tuesday, valuing the group at RM1.16 billion.