SHC Capital Asia proposes to buy MM Myanmar for $51m

Photo: Juliet Shwe Gaung. Myanmar currency.

SGX-listed SHC Capital Asia Ltd, an investment holding company backed by See Hoy Chan Sdn Berhad Group has said it plans to acquire MM Myanmar Pte Ltd, for about S$69.7 million ($51 million).

It will finance the acquisition by issuing 264.997 million new consolidated shares at an issue price of 26.3 Singapore cents per share, following a seven-to-one share consolidation.

As part of the deal, which is actually a reverse takeover, SHC Capital will buy MM Myanmar shares from three entities  – a wholly owned unit of Mainboard-listed Yoma Strategic Holdings which owns 63.1% of MM Myanmar, First Myanmar Investment Company Ltd (FMI), and Exemplary Ventures Ltd (EVL).

Following the acquisition, SHC Capital has proposed to change the name of MM Myanmar to Memories Group Limited and undertake a compliance placement of up to 93 million new consolidated shares.

Justifying the deal, SHC Capital said that Memories Group, a tourism-related company based in Myanmar, had an unique business model, and added that the latter had developed an Integrated Tourism Platform that connects its three business segments under one brand.

“Each of these segments comprise of different types of businesses and the platform allows for operational synergies, economies of scale, and opportunities for cross-selling of various tourism offering and services. The end result is a seamless and holistic tour experience for their customers in Myanmar,” SHC said.

The first of the three business segments is the experiences segment that operates hot air balloon flights in Bagan and Inle Lake regions. Plans for the experiences segment also include Memories Group intending to develop the BL Business into a proposed commercial and tourism-related hospitality development located in Nyaung U Township, Bagan, Myanmar, it said.

The second is the services segment, which is operated under Asia Holidays Travel & Tours Co. Ltd, and the latter specialises in designing and implementing customised tours, organisation of unique excursions, activities and cultural experiences, the management of travel logistics, as well as organisation of events.

The third is the hotels segment – its assets here include a luxury 19-room boutique resort hotel located in the foothill of Mount Zwekabin in Hpa-An Township (HAL) of Karen State, Myanmar, and Pun Hlaing Lodge, which when completed in FY2019, will be a 46- room unique ‘urban resort’ located within Pun Hlaing Estate in Hlaing Tharyar Township of Yangon.

It must be noted that of MM Myanmar’s five businesses, three of them were transferred to it from Yoma’s wholly owned unit Yoma Strategic Investments Ltd (YSIL), while the other two businesses that are now placed under it, were initially under EVL.

The Group is led by Michel Novatin, CEO and Jean-Michel Romon, COO, who have extensive experiences in the hotel and tourism business operation across Asia, Europe and the Middle East, the company said. Novatin also heads as the CEO of SHC Capital Asia which will continue to be a dedicated platform to focus on tourism related works in Myanmar.

SHC Capital had previously intended to acquire Tong Da Medical Device in 2015, but that deal was called off due to certain milestones not being met within the deadline.

There are also several other matrices to this deal.

First, for the HAL business, if long-term leases or requisite approvals are not obtained in the next 36 months, then EVL will buy back the business.

Similarly in the balloon flights business (BOB business), if the approvals from local authorities do not come through, or if regulators direct that MM Myanmar reduce its stake in this business, or if the company is required to renew or apply for fresh permits, on or prior to 31 December 2018, then YSIL and FMI will buy back this business.

Even in the case of the BL business (this is part of its experiences segment), if within three years of the deal, the development plan is not approved by local authorities, or if MM Myanmar fails to get approvals for long-term lease of the land, then YSIL and FMI will be required to buy back this business

“This platform will allow the Memories Group to enjoy operational synergies, economies of scale and opportunities for cross-selling of the various tourism offerings and services, with the aim of giving tourists a seamless and holistic tour experience in Myanmar. To further establish its position as a leading tourism company, the Memories Group’s integrated business model and extensive local network allows it to leverage on its first mover advantage and have an edge over its competitors in Myanmar’s relatively fragmented tourism industry,” SHC added in a statement to the local exchange. 

The tourism sector in Myanmar has room to grow – the number of tourists arrivals in Myanmar reached 4.7 million in 2015, with the industry’s contribution to the country’s GDP is $1.6 billion (2.6 Percent of GDP) for the same year.

The World Travel and Tourism Council estimates that the growth is expected to rise by 7.6 percent to 2026.

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