SINGAPORE (THE BUSINESS TIMES) - Rex International has entered into a subscription agreement to invest up to US$4 million (S$5.4 million) in commercial drone company Xer Technologies, it said on Tuesday (July 6).
The investment comprises US$1 million for a 40 per cent interest in Singapore-incorporated Xer Technologies, and a commitment to inject up to US$3 million in the company, subject to the achievement of certain technical and sales milestones within the next 18 months.
The agreement is also conditional upon Xer Technologies acquiring 100 per cent stake in UAV Development Sweden for 50,000 krona (S$7,866), which has its own in-house developed drones and is also a spin-off from a security company that uses drone technology.
Rex shares jumped 5 per cent when trading began on Tuesday, after the announcement. The stock was up 0.5 cent, or 2.5 per cent, to 20.5 cents at 4.39pm, with 20.47 million shares traded.
The company also announced on Monday evening that a significant milestone was achieved in the Yumna Field in Oman, with cumulative production exceeding four million stock tank barrels on June 30.
Its drone acquisition is part of Rex International's efforts to diversify from its core business of oil exploration and production, and will "bring the group a step closer towards its approved business diversification mandate to include sustainable solutions for energy production and materials used in various industries", the group said.
Rex International added that the move will allow it to have a stake in the global commercial drone market, which it expects will reach US$501.4 billion by 2028, and register a compound annual growth rate of 57.5 per cent from this year to 2028.
The group said that it will have the right to appoint two out of five directors to the board of Xer Technologies, and will also support the company with management personnel from the group.
Xer Technologies, which has yet to begin operations, is slating the in-house developed heavy-duty long-range drones to be commercially available in the fourth quarter of this year. It plans to target clients in areas of infrastructure inspection, search-and-rescue operations, public safety and animal herding.
Rex International estimates the unaudited pro forma net asset value of Xer Technologies as at Dec 31 last year was approximately US$434,000. The total consideration of up to US$4 million represents 2.9 per cent of US$136.86 million, which is the group's latest net tangible assets as at Dec 31.