Shareholders block CAWOW issue

By Krissana Parnsoonthorn, Bangkok Post, Thailand

Nov. 6--Shareholders of the fitness operator California WOW Xperience Plc have rejected plans to raise capital by issuing 150 million new shares.

CAWOW told the Stock Exchange of Thailand that its shareholders did not approve a plan to issue 150 million shares at a one baht par value to increase its registered capital to 471.95 million baht.

The company's board on Sept 29 approved the plan to raise funds to repay debts and increase working capital.

But CEO and major shareholder Eric Levine proposed at the Nov 3 shareholders' meeting that other financing options should be explored. Shareholders agreed to abandon the share issue.

Mr Levine holds a 38.58 percent stake in CAWOW while the cinema operator Major Cineplex has a 36.79 percent interest.

Chief financial officer Willian Dobson said in the company's statement that it would speed up discussions with creditors over its debt repayment plan and find a proper financing alternative after the issuance was rejected.

A Major executive, who asked not to be named, said any plans to increase registered capital should wait until CAWOW revamps its business structure.

"Money is not a big issue, but all of us agreed that we should change and find the way and strategy to improve performance first," the executive said.

Tarisa Chaisuntornyotin, an analyst at Siam City Research Institute, said the scrapping of CAWOW's capital increase plan was positive for Major. "The losses from CAWOW have dragged on Major's balance sheet for some time," she said.

Mrs Tarisa said Major miscalculated the benefit from investing in the fitness company. The cinema operator expects CAWOW to be a magnet when it opens new stand-alone cinema complexes.

But CAWOW faces serious competition and has failed to convince Thais to join fitness centres, she said.

During the first half of the year, CAWOW posted a net loss of 175.38 million baht, compared to a net profit of 5.1 million in the same period last year, on total revenue of 788.72 million baht. In the second quarter alone, losses were 123.17 million baht due to the closure of an outlet in the Sukhumvit area.

The research institute predicted CAWOW's third-quarter losses would decline from the previous quarter as it had not closed any fitness centres.

In the first half, Major reported a net profit of 25.58 million baht, down sharply from 460.96 million in the same period last year, on revenue of 2.68 billion.

"In my opinion, if there is a new capital-increase plan in the future, Major will probably not inject more funds into CAWOW and will accept a shareholding dilution," Mrs Tarisa said.

Shares of CAWOW closed on the SET at 0.86 baht, down 2 satang, in trade worth 663,000 baht, while Major shares rose 25 satang to close at 7.45 baht in trade worth 22.79 million baht.

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