Zenith targets ETI Tech?

By Sharen Kaur
Published in NST on May 22, 2014

GAINING CONTROL: Appointment of two directors said to be a prelude to reverse takeover

ETI Tech Corp Bhd, controlled by AirAsia Bhd’s Datuk Kamarudin Meranun, is likely to be a reverse takeover (RTO) target of Zenith Construction Sdn Bhd, part of a consortium that will develop the proposed RM6.3 billion Penang undersea tunnel project.

Last Friday, two Zenith directors, Zarul Ikhwan Zarul Ahmad and Datuk Mohamad Amin Mohamad Salleh, were appointed to the ETI Tech board.

Sources said Zarul Ikhwan and people aligned to him have gained control of ETI Tech after taking over the 10 per cent new shares issued by the company through their privatelyheld Hong Kong vehicle.

“This is not a hostile takeover. They have briefed the major block shareholders of ETI Tech of their long-term plans for the company.

They do not wish to change the core business of ETI Tech but are seeking a natural change,” said a source close to Zarul Ikhwan.

The biggest block is held by Kamarudin, one of the founding shareholders of AirAsia.

According to Forbes magazine, Kamarudin is Malaysia’s 27th richest person, worth nearly US$800 million (RM2.6 billion), based on shares in listed firms.

Maybank Investment Bank (Maybank IB) said in its reseach note on Monday that the entry of Zarul Ikhwan could be a prelude to an RTO.

Corporate Malaysia has seen a slew of RTOs over the past 12 months, starting with Eco World Development Group Bhd, Malaysia Aica Bhd and Damansara Realty Bhd.

Shares of such companies have risen by more than 100 per cent, based on RTO announcements and value of assets injected.

Zarul Ikhwan is the son of Datuk Zarul Ahmad Zulkifli, the executive chairman of consortium Zenith BUCG Sdn Bhd, which is undertaking the undersea tunnel project.

Mohamad Amin is the former chief of government- owned Syarikat Perumahan Negara Bhd (SPNB).

Maybank IB said the entry of Zenith could revive ETI Tech, a PN1/GN5 company.

 “If an RTO  takes place, we believe interest in ETI Tech will pick up as Zenith BUCG will be a prime beneficiary of infrastructure development in Penang. For Zenith, there is also a compelling factor to go for ETI Tech’s listing status for fund-raising in future,” it said.

    ETI Tech has been making losses in the past two years and is in need of capital injection.

   At a recent analyst briefing, Mercury Securities said the management of Zenith had indicated it was looking at taking over a public-listed company and ETI Tech was one of the companies under its radar.

   The Zenith management likes ETI Tech as it is reasonably priced on absolute terms and the company is based in Penang, where the jewel of Zenith’s crown is located, it said.

  Business Times understands that ETI Tech is expected to get two construction jobs worth RM255 million this week.

 It will seal a joint venture with several privately-held Bumiputera firms, which will secure  contracts from SPNB.