SINGAPORE - Datapulse Technology has changed its mind on a recently acquired haircare business, and now wants to sell it back for less than an initially agreed amount to expedite the disposal.
The former media storage business announced late Thursday (Nov 15) that it has signed a binding term sheet to sell back Malaysia-incorporated Wayco Manufacturing to Way Company for up to $3.18 million. This is at least 7.5 per cent less than the $3.43 million that Datapulse paid for Wayco and which Way Company was obliged to pay if Datapulse exercised its right to sell back Wayco. If Wayco's net tangible asset (NTA) value is at least RM5.91 million (S$1.9 million) and less than RM6.95 million, the consideration payable will be reduced by the shortfall between Wayco's NTA and RM6.95 million.
In explaining the decision to unwind an acquisition that was made less than a year ago despite significant criticism from shareholders, Datapulse said on Thursday that the disposal of Wayco will enable Datapulse to focus its resources on developing and growing the investment and property businesses approved by its shareholders after taking in Wayco's financial performance for FY18 and the near-term outlook for the haircare business.
But, the board said, if Way Company were to dispute Datapulse's right to demand a buyback, the company could be dragged into legal proceedings.
"Accordingly, the board is of the view that the proposed disposal, while requiring the company to sell back Wayco to the purchaser at a slight discount to the original purchase consideration, will allow the company to effect the disposal of Wayco more expeditiously, and avoid the company being engaged in potentially protracted legal proceedings to enforce its right under the buyback undertaking," Datapulse said.
The company added that the proposed disposal is conditional on shareholders' approval at a general meeting. This deal is also subject to Wayco's auditors affirming its net tangible asset is no less than RM5.91 million no later than 30 days before the date of completion.
In a separate disclosure, Datapulse said it has received a letter of demand dated Wednesday from former directors Ng Cheow Chye, Ng Cheow Leng and Si Yok Fong for total claims of $751,118 linked to an alleged profit-sharing arrangement with the firm.
Datapulse said it is seeking legal advice in relation to these claims.
The Wayco deal was at the centre of a heated challenge to Datapulse's board earlier this year, as shareholders and corporate governance watchdogs raised questions about the wisdom of the acquisition and the way it was carried out. A report by Ernst & Young Solutions, concluded in March, reckoned that Wayco's haircare business was not sustainable on its own, and that longer-term feasibility would require a shift from a standalone manufacturing business to a manufacturing and distribution business.
In justifying the deal to shareholders, Datapulse argued that the right to sell back Wayco at the same consideration, if material adverse matters are discovered, made it a relatively low-risk transaction.
Datapulse closed at 26 cents on Thursday, down one cent.