Singapore-based electronics components distributor WE Holdings has reached a deal to buyout the marine sand supplier Hua Kai for S$25 million. The company also plans to issue an equal-sized convertible bond offering.
Hua Kai is primarily engaged in the trading of sand, dredging and supply of processed sand, needed for land reclamation activities in the South East Asia region. The company has ongoing projects with partners in Singapore and Brunei. It had recently secured an agreement to supply and deliver at least 100 million cubic metres of marine sand within eight years for reclamation works relating to the Pulau Muara Besar (PMB) project in Brunei.
The deal will see WE Holdings pay S$8 million in cash and S$2 million in shares of the company to Koh Lee Hoo. Hua Kai is wholly owned by Koh Lee Hoo.
The payments are subject to the due diligence determining that the net tangible asset of Hua Kai and its affiliates is no less than S$10million.
Besides, the deal also results in Koh Lee Hoo providing a personal guarantee that Hua Kai will achieve a net profit of S$6 million per year for its financial year end of 2016, 2017 and 2018. The remaining S$15 million may be paid over a three-year earn-out period, subject to conditions relating to Hua Kai’s net profit performance for the 2016, 2017 and 2018 fiscal years.
WE Holdings also announced that it would launch a three-year fixed rate bond offering to fund its commodity business and investments in Myanmar and for its own working capital requirements.
Terence Tea, executive chairman and managing director of WE Holdings, said: “The proposed acquisition is in line with the company’s intention to expand our commodities business and we are also exploring opportunities presented by the cement, oil and gas and petroleum sectors in Myanmar. To date, we have successfully gained a foothold across different spheres of the commodities sector in the region and are ready to ride on growth opportunities as they unfold.”