Rubber processor Halcyon Agri may merge with rubber producer GMG Global if talks by China state-owned enterprise Sinochem Group to take control of Halcyon Agri bear fruit.
Halcyon Agri said in a Singapore Exchange (SGX) filing yesterday it is in talks to sell a controlling stake of the company to Sinochem.
Halcyon Agri added that there is a possibility that Sinochem will inject several assets into the mainboard-listed firm as part of the deal.
Hours later, GMG Global disclosed it had received a letter from Sinochem saying that it is "currently in discussions with Halcyon Agri on a potential strategic transaction involving the combination of Halcyon Agri and our interests in GMG Global and certain rubber-related assets of Sinochem International".
Sinochem, a Fortune Global 500 company, owns a controlling stake in GMG Global after one of its units bought 51 per cent of the company for $267.28 million in 2008.
Halcyon Agri halted trading in its shares on Tuesday afternoon on market talk that Sinochem was taking a stake in it. The SGX queried Halcyon Agri and GMG Global over unusual price movements after their share prices surged over 8 per cent in early afternoon trading on Tuesday. Halcyon Agri immediately requested a trading halt, citing the "pending release of an announcement". GMG Global requested a trading halt only on Wednesday morning, after its share price surged 10 per cent to 33 cents on Tuesday.
In its response to the SGX yesterday, Halcyon Agri said "the possible transaction is not imminent" and there is "no certainty" it will take place or when that will be. Its shares rose 8.7 per cent on Tuesday to 69 cents before trading was halted.
The firm was queried by the SGX twice last year - in September and November - over unusual trading activity. It had said in both instances that it was in "confidential discussions with certain parties regarding a potential strategic transaction".
Halcyon Agri reported a 307 per cent surge in revenue to $781.3 million and a net profit of $6.3 million for the nine months to Sept 30 last year, reversing a $15.66 million loss in the same period a year earlier.