SINGAPORE - Maxi-Cash Financial Services Corporation on Tuesday night (Oct 29) said it is looking to buy four investment properties that house its businesses, for a total cash consideration of $23.7 million.
Its wholly-owned subsidiary, Maxi-Cash Property, on Oct 29 entered into a conditional sale and purchase agreement with 8G Investment for the proposed acquisition.
8G Investment is a private real estate developer. Its shareholders include Maxi-Cash director and controlling shareholder Koh Wee Seng, as well as Tan Su Lan (Mr Koh's mother) and Lim Kwee Hua (Mr Koh's spouse). Mr Koh and his immediate family own more than 30 per cent of 8G shares. He also holds a 79.58 per cent interest in Maxi-Cash.
8G is the registered proprietor of the four properties: Block 165, Bukit Merah Central, #01-3661; Block 101, Yishun Avenue 5, #01-95; Block 702, Ang Mo Kio Avenue 8, #01-2515; and 40 Changi Road. The first three are HDB shops, while the fourth is a strata shop unit.
It leases some of the units within the properties to the Maxi-Cash group for the latter's existing pawnbroking and retail businesses.
The acquisition will enable the group to own the properties instead of periodically renewing the leases which could affect the operation and costs of the businesses, Maxi-Cash said on Tuesday.
It is also in line with the group's strategic plans to acquire assets with the potential for capital gain, while being used (or potentially used) for the purposes of its existing pawnbroking and retail businesses.
The estimated net profits before income tax attributable to the properties for H1 2019 ended June 30 is $69,000. This figure is determined by reference to the rental yield of the properties based on the existing tenancies (including those with Maxi-Cash) less property tax, estimated interest expenses and depreciation. It is equivalent to about 1.02 per cent of Maxi-Cash group's net profits of $6.85 million for the same six-month period.
The consideration of $23.7 million was arrived at based on arm's length negotiations between Maxi-Cash Property and 8G. It is at a 1.66 per cent discount to the $24.1 million market value of the properties determined by independent valuer JLL.
Maxi-Cash has paid a deposit of around $1.2 million, equivalent to 5 per cent of the consideration. The remaining amount will be paid on completion of the acquisition.
Completion of the acquisition is subject to and conditional upon, among other things, approval by the independent shareholders, consent of the Housing Board for the purchase of the three HDB shops, and satisfactory replies from the legal requisitions to the local authorities.
If any of these three conditions are not satisfied by March 31, 2020, the sale and purchase agreement will be null and void, and all monies paid by Maxi-Cash will be refunded free of interest.
Maxi-Cash will convene an extraordinary general meeting (EGM) to seek shareholder approval. Mr Koh and his associates will abstain from voting on the ordinary resolution to be proposed at the EGM for the acquisition.
The proposed acquisition is an interested-person transaction, as 8G is an associate of Maxi-Cash controlling shareholder Mr Koh.
Shares of Maxi-Cash were flat at 12.8 cents as at 9.33am on Wednesday, after the announcement.