SINGAPORE - Mainboard-listed ASTI Holdings said a S$17.2 million success fee that it will pay on a S$90 million deal is not aligned with market rates, but it was meant to incentivise an advisor to achieve a better deal.
ASTI, a semiconductor equipment maker, said this in response to queries by the Singapore Exchange regarding the fee paid to financial adviser VSA Capital Shanghai in ASTI's proposed disposal of its wholly owned subsidiary Semiconductor Technologies & Instruments Pte Ltd.
In a filing on Tuesday (April 17), ASTI acknowledged that the success fee was "not in line with the typical market rate".
However, the fee was based on a tiered formula to incentivise VSA Capital Shanghai to achieve a better commercial deal - which was achieved, added ASTI.
Tuesday's filing follows an April 9 response to SGX queries about the deal. On March 30, ASTI had entered into a sale and purchase agreement with Shanghai Pudong Science and Technology Investment to sell its core semiconductor technologies and instruments businesses, collectively known as the STI Group, for S$90 million in cash and an additional S$38 million in dividends.
ASTI said on Tuesday that as indicated in its Apr 9 announcement, "the offer for the STI Group is significantly better than previous offers by other purchasers, even after taking into consideration the deduction of the success fee, although this cannot be disclosed at this time due to confidentiality provisions".
In the Apr 9 filing, ASTI stated that VSA Capital Shanghai is not related to any of its directors or controlling shareholders.
On Tuesday, ASTI named the sole shareholder and director of VSA Capital as FeiFei Zheng. It further stated that no ASTI director or substantial shareholder has any interest, direct or indirect, in the success fee.
SGX also questioned the profit warranty of S$17 million for STI Group in 2018 and 2019, noting that this was "significantly higher than the historical profits achieved by STI Group". If STI Group fails to meet the profit warranty, the cash consideration will be reduced to S$73 million, although the success fee will not be adjusted.
Asked for the basis for the S$17 million target, ASTI replied that the actual profits for each of the two financial years would exclude corporate expenses or charges that were historically charged by ASTI to STI Group.
As illustration, ASTI said the average net profit before tax (and excluding such historical corporate expenses and charges) for STI Group in the financial years ended Dec 31, 2015, Dec 31, 2016 and Dec 31, 2017 is S$10.2 million each year.
"This gives the company confidence that the aggregated target profits of S$17 million for both 2018 and 2019 can be met," it said.