Lankem Group triggers takeover code on ACME

• Seven related parties acquire 31.48% stake in loss-making printing and packaging venture

Lankem Group and related companies have triggered the SEC’s Takeovers and Mergers Code on ACME Printing and Packaging PLC, having acquired over a 30% stake, and will make a mandatory offer.

In a filing to the CSE, Lankem said that it and six related parties were holding 12.95 million shares or a 31.48% stake of ACME.

The parties are E.B. Creasy and Company (19.92%), Lankem Ceylon (7.22%), S.D.R. Arudpragasam (2.51%), Union Commodities (1.42%), Colombo Fort Investments (0.19%), Colombo Investment Trust (0.17%) and Colombo Fort Land and Building (0.05%).

Lankem said as per the Takeovers and Mergers code, it would be making a mandatory offer to purchase the balance 28.2 million shares accounting for 68.52%. Singapore-based Clovis Company Ltd. owns a 27% stake in loss-making ACME, which has 1,739 shareholders with a public float of 49%.

The major stake of 19.92% was bought on 7 September from Richardson Holdings Ltd. at Rs. 12 per share in a deal worth Rs. 96 million. Last week, ACME saw 12.46 million of its shares traded for Rs. 146.2 million between a high of Rs. 13.50 and a low of Rs. 8.70 before closing at Rs. 12, up by Rs. 3.20 or 36%.

Yesterday, ACME closed unchanged at Rs. 12 with 230,217 shares traded for Rs. 2.76 million.

Deals on ACME follow its Chairman J.M. Swaminathan early last week saying that multiple external factors were making it difficult for the company to operate profitably, while calling for an infusion of funds.

In a filing to the CSE, the company said it had a high level of interest-bearing debt as reflected in the financial statements for 30 June 2021.

“Increasing raw material prices, the difficulty in importing raw materials and the constraints on working capital are making it difficult for the company to operate profitably without an injection of funds,” it said.

The company is currently looking for investments into the company and/or its fully owned subsidiary, Acme Packaging Solutions Ltd., as well as exploring other options such as to dispose of or sell assets to raise money for working capital and reduction of debt.

Though ACME saw a 19% growth in Group revenue to Rs. 337.9 million in 1Q of FY22, cost of sales rose by 23%, leading to gross profit of Rs. 3.6 million, down by 66% from a year earlier. Loss from operations rose by 182% to Rs. 37.7 million and loss before taxation was Rs. 70 million, as against a Rs. 48 million loss in 1QFY21. Accumulated loss at ACME stood at Rs. 915.4 million as of 30 June 2021. It had non-current liabilities of Rs. 83.4 million and current liabilities were Rs. 1.26 billion.

In FT21, Group revenue increased by 18% and the gross profit margin improved from 5.8% to 8.7%. However, the Group reported a loss of Rs. 100.6 million before tax and a loss of Rs. 97.9 million in the company compared to Rs. 183 million loss and Rs. 100 million loss respectively in the preceding year.