SINGAPORE - WE Holdings said that it has entered into a non-binding memorandum of understanding to acquire Hua Kai for $25 million, as the Singapore-listed electronics company seeks growth in the commodities sector.
Hua Kai is a supplier for land reclamation projects across South-east Asia. It recently secured a deal to supply at least 100 million cubic metres of marine sand in eight years for reclamation works in Brunei.
"When completed, the proposed acquisition will provide the group with a ready entry into the land reclamation business," WE Holdings' executive chairman and managing director Terence Tea said.
"Backed by Hua Kai's concessions and supply contracts, the proposed acquisition is posed to contribute positive to the company's top and bottom lines."
The potential deal will be funded by a cash payment of $8 million with another $2 million in shares. The remaining $15 million may be paid over a three-year earn-out period.
The proposed acquisition is the latest steps WE Holdings took to diversify into the commodity sector.
In May 2013, the group entered into a non-binding term sheet to acquire cement manufacturer Dragon Cement in Myanmar, where the company is also exploring opportunities in oil and gas businesses.
In connection with the acquisition of Hua Kai, WE Holdings has entered into another non-binding MOU with NRA Capital for the proposed issue of bonds totalling $25 million. Proceeds from the bond sale will be used to finance WE Holdings' commodity business and investments in Myanmar.