SINGAPORE - Watch-listed Mun Siong Engineering has withdrawn from its proposed 75 per cent joint venture (JV) in the US with a businessman, it announced on Monday (Oct 7).
The company's board of directors decided to allow the JV's operating agreement to lapse after Sept 30.
This was because a certain principal financial institution was unable to provide guidance on its position on the proposed JV, which made it "impossible" for the JV partner, Gary Harvey (including his companies), to satisfy some of the conditions precedent in the agreement by the Sept 30 deadline, Mun Siong said.
In June, Mun Siong said that it was looking to expand its business into the US via the proposed JV, reducing its risk exposure to any fluctuations in its primary market in Singapore.
Mun Siong thus incorporated Pegasus Advance Engineering (US) (PAE US), which entered into the June 19 operating agreement with Mr Harvey to set up the JV, named MS&H Industrial LLC.
PAE US was to own 75 per cent of MS&H, while Mr Harvey would hold 25 per cent.
It was agreed that PAE US would contribute US$3 million in funds to the JV to be used as working capital and/or for capital expenditure, and might also provide a shareholder's loan of up to US$3 million to finance the JV's projects.
Meanwhile, Mr Harvey would contribute a property to house the JV's operations. This property was valued at US$3.2-3.5 million as at June 7, with US$2.3 million owed to the bank.
Mr Harvey is a US businessman who founded and manages two firms in the engineering and fabrication business in Ponca City, Oklahoma.
Operating in Ponca City, the JV would have provided mechanical engineering, electrical and instrumental services, as well as specialised services to the oil and energy industries in the US.
On Monday, Mun Siong said that its executive director, financial director and solicitors in the US had been in discussions with the financial institution and Mr Harvey, but those talks were not conclusive.
Mun Siong said it is thus in its interest to withdraw from the JV, seeing as the loan agreements are between the financial institution and Mr Harvey's companies (with him acting as guarantor), and that such negotiations will likely be protracted.
Mun Siong will continue to seek business opportunities in the North America market.
Last month, the group also incorporated Pegasus Advance Engineering (Netherlands) BV, a holding company for its interest in North America. The Netherlands holding company will be a wholly-owned indirect subsidiary of Mun Siong, and also owns 100 per cent of PAE US.
Shares of Mun Siong on the Singapore bourse's main board was flat at 4.2 cents as at 2.05pm on Monday.