Pelikan International Corporation Berhad (PICB) has seen a significant bump in its share price on the Malaysian stock market over the past several days, noting an 11% increase this past Friday alone. Why is Pelikan’s stock heating up right now? The market activity is tied directly to PICB’s subsidiary, Pelikan Group GmbH, having entered into a conditional sale and purchase agreement on July 7th to sell its logistics center located at Straße der Einheit, Falkensee, Germany. The logistics center is an expansive 135,000 square meter (~1,453,128 square foot) space that includes areas for warehouse storage, offices, and production. The buyers are wholly owned subsidiaries of HWE Investor GP S.à.r.l, part of the Hillwood Group which is based out of Dallas, Texas. The US based Hillwood Group also has operations in the United Kingdom, Germany, and Poland. They are a developer of residential, commercial, and industrial real estate. The property being disposed of came to Pelikan in April 2010 as part of their acquisition of Herlitz AG. At that time, the company acquired a 66% stake in the stationary brand for approximately $60 million (€45 million/RM221.85 million). The building’s current occupants are eCom Logistik GmbH, a logistics services company formed in 2003 as a subsidiary of Herlitz AG. Currently boasting approximately 166 employees it became the wholly owned subsidiary of Pelikan AG in 2015. Fret not if you were worried that Pelikan might be selling off its fine writing division. The property will sell for approximately $96 million (€81 million/RM399.33 million) which is expected to net the company a one-off gain of $44 million (€37 million/RM184.83) based on PICB’s audited consolidated financial statements for fiscal year 2020. Read on to discover all of the details and learn just how Pelikan plans to use the revenue this sale is expected to generate.
A look at the financial history of PICB shows that the company reported losses from 2011 through 2015. After working to streamline assets, the company finally returned to the black in 2016. Despite again becoming profitable, Pelikan’s share price has been declining over the last several years and asset monetization has remained a consideration. So why now? Reports out of Malaysia indicate that asset monetization has picked up speed over the past year following the arrival of new shareholders in Pelikan since 2019. Most notable are Urusharta Jamaah Sdn Bhd who now holds a 26% stake and Ikhlas Capital Singapore Pte Ltd. which has a 10% stake in the company. Of course, Pelikan’s current president and CEO, Loo Hooi Keat, is reported to have a 10% direct and 6% indirect stake in the company that he heads. Records indicate that Pelikan has not paid a dividend to its shareholders in some time, not since 2012 to be exact. A release from PICB had this to say about the sale;
“The proposed disposal will enable the group to unlock capital resources from being tied up as long term assets and realize the value of the property at a fair market value whilst strengthening its financial position… The disposal consideration will be mainly used for the Group’s working capital requirements, rewarding the shareholders though special cash distribution, further reorganizing its operations internally and for partial repayment of its bank borrowings, thereby enhancing overall profitability and lowering its financing cost.”Pelikan International Corporation Berhad
One issue that has plagued the company’s financials is its burden of debt. PICB reportedly has a total debt of $95 million (€80 million/RM400 million) which is higher than its current market capitalization of $57 million (€48 million/RM240 million). Malaysian reporting tells us that of the $96 million in proceeds the sale is expected to generate, Pelikan will use $48 million (€40 million/RM200 million) to repay bank loans, $39 million (€33 million/RM161.93 million) for working capital as well as to pay a special cash dividend to shareholders, and $6 million (€5 million/RM 24.6 million) for internal reorganization. Pelikan also reports that it is examining the consolidation and redistribution of other existing plants and production facilities counted amongst its assets.
In addition to the sale terms as outlined above, Pelikan Group GmbH entered into a conditional lease agreement with one of the buyers, HE4 Falkensee 2, to remain a tenant of the property for a five year period for an annual gross lease fee of $4.9 million (€4.15 million/RM20.46 million) per year, payable on a monthly basis. The term would commence upon completion of the proposal. That deal will give the company ongoing access to seven stories housing 109,036 square meters of office, production, and storage space. The site includes a fully automatic high-bay warehouse with 49,000 pallet spaces, a fully automatic box store with 72,000 containers, 59 loading ramps for incoming and outgoing goods, a tilting tray sorter, an automatic loading system, and 2.8 miles of conveyor technology with 36 elevator systems to bring it all together. The proposed deal allows Pelikan to unlock capital resources while also ensuring that operations at the existing location are not disrupted in the near term. Of course, all of the above remains dependent upon the approval of PICB’s shareholders which will be sought at an extraordinary general meeting to be convened at some point in the near future. The deal is anticipated to be completed by the fourth quarter of 2021 provided everything goes as anticipated.
It is unclear at this time just how much of the proceeds may find their way to Pelikan’s fine writing division, specifically the manufacturing plant at Peine-Vöhrum but, given the recent issues there, I would hope that this would be a top priority for the business. I would fully expect that to be the case prior to any distribution of dividends to the company’s shareholders. Also yet to be seen is just how the fine writing division may be affected, if at all, by those future plans for consolidation and reorganization. Stay tuned to this blog, as always, for the latest news out of Germany regarding any future developments.
*All dollar ($) and euro (€) values quoted above are estimates provided in order to establish a commonly understood frame of reference for the reader. The values quoted in Malaysian Ringgit (RM) are the most accurate reported.
- “„Finanzlage stärken“: Pelikan verkauft Logistikzentrum in Falkensee.” Business Partner PBS. Wed., July 7, 2021.
- Khalid, Sulhi. “Stationery maker Pelikan surges as much as 53% in active trading.” The Edge Markets. Edited by S. Kanagaraju. Wed., July 7, 2021.
- Mung, Tan Siew. “Pelikan sells Germany logistics centre for RM399.33m, plans special cash distribution.” The Edge Markets. Edited by Joyce Goh. Thur., July 8, 2021.
- “Pelikan jual aset logistik di Jerman.” BH Online. Thur., July 8, 2021.
- “Pelikan selling German logistics centre for RM399m.” The Star. Thur., July 8, 2021.
- “Pelikan selling German logistics hub to US-based Hillwood Group.” The Sun Daily. Thur., July 8, 2021.
- “Quick take: Pelikan jumps 11.7% in active trade.” The Star. Fri., July 9, 2021.
- Zainul, Intan Farhana. “Pelikan may sell some assets abroad.” The Star. Thur., July 8, 2021.