United Envirotech's main-board-listed cash company Memstar Technology has entered into a reverse takeover with the Longmen Group, a Chinese private natural gas developer.
In a filing with the Singapore Exchange on Monday, Memstar said it has agreed to acquire the entire issued and paid-up share capital of Longmen Group Ltd for US$420 million (S$546 million) with its own shares.
When the transaction is completed, Longmen will own 73.10 per cent of Memtech.
Memtech said the share issue price represents a premium of approximately 7.24 per cent to the volume weighted average price of its shares of S$0.01506 on November 28, 2014, their last traded day prior to the placement agreement.
Longmen is principally engaged in the exploration, development, production and sale of coal bed methane (CBM) resources in the Ordos Basin in China's Shaanxi Province.
As at 31 December 2013, based on a report by Netherland, Seawell & Associates Inc., it is estimated that the Longmen concessions contain proved and probable net gas reserves of approximately 190 billion cubic feet, with a present value of approximately US$917 million.
Memstart said the proposed acquisition will provide the company with an opportunity to venture into a new business area, with proven reserves, that has the potential for growth.
Longmen is owned is majority-owned (50.43 per cent) by LESS Longmen Co Ltd, a strategic fund of funds focused on investing in recycling, renewables, forestry and organic food production. The rest of the compaby is owned by various private equity funds.
Memtech said that Longmen's management comprises a team with considerable experience in the energy sector, with various members having been with Longmen since it was founded in 2005. Certain key management members have over 20 years working experience with Petro China and considerable expertise in both the conventional and unconventional oil and gas sectors, including exploration, drilling, development, production, marketing and valuation.