SINGAPORE - Catalist-listed Rich Capital will acquire two construction firms owned by Wang Zhen Wen - chairman of Rich Capital and a controlling shareholder, and Rich-Link Group (RLG), for $33.7 million instead of a previously agreed $44 million.
The revised price for Rich-Link Construction (RLC) and Rich-Link Builders (RLB) - effectively owned by Mr Wang - in this interested person transaction is lower than the initially agreed amount by 23.4 per cent.
The lower price took into account a revised valuation report of RLC and RLB issued by independent valuer, BDO Advisory, on April 29. It comes after the final audited financial statements of both companies for fiscal year ended Dec 31, 2018.
The price also factored in outstanding orders secured, and prevailing business risks and prospects within the construction industry, the group said on Wednesday. The acquisition was for the mining-focused company to expand into the construction business.
Rich Capital will pay for the companies by issuing new shares to Mr Wang and RLG in two tranches at an issue price of $0.006 per share according to the terms of the original sales and purchase agreement. The price would be less dilutive, compared to the $0.0025 volume-weighted average price of the group's shares as at May 7.
The first tranche consists of about 4.5 billion shares worth almost $27 million, while the second tranche consists of about 1.1 bilion shares worth about $6.7 million.
If Rich Capital has sufficient working capital to meet its operational requirements and debt repayment obligations for the following 12 months after the second tranche payment date (15 business days from the FY2019 audited accounts of RLC and RLB are finalised), the second tranche may instead be funded by a combination of bank borrowings, internal cash resources and/or other sources of funding.
After the share issue to Mr Wang and RLG, both parties will collectively own up to 60.08 per cent of the enlarged share capital.
A whitewash waiver was also granted to Mr Wang by the Securities Industry Council (SIC) on Jan 30, which would exempt him from having to make a mandatory offer to buy out Rich Capital if his shareholdings in the company exceeded 30 per cent.
The whitewash resolution must be approved by shareholders within three months from the grant of waiver, and Rich Capital has submitted an application to the SIC for an extension of this deadline.
For illustrative purposes, if the acquisition and transactions were completed on April 1, 2017, and including RLC and RLB's audited profit after tax for fiscal 2018, Rich Capital's earnings per share would be 0.02 cent, instead of a loss per share of 0.05 cent.
Rich Capital shares were up 33.3 per cent, or $0.001, at $0.004 as at 9.33am.