Serial System will sell its stake in Australian laundry business SPL Holdings (Australia) for US$31.2 million (S$43 million), the electronic components distributor said yesterday morning. It also requested a lift of its trading halt.
Serial System said it expects to recognise a gain of US$20 million from the sale of its 27.34 per cent stake in SPL, representing a 179 per cent premium over the company's book value in SPL as of June 30.
The company will use about 40 per cent of the proceeds to repay bank loans and also plans to pay a special dividend to shareholders.
The rest of the proceeds will be for working capital to support its main distribution business and for future investments.
Serial System first invested in SPL in 2014, taking a 20 per cent stake, then increased its investment in 2016. Its entire stake will be sold to Anchorage Bridge Street, a company owned by funds managed by Australian private equity firm Anchorage Capital Partners.
On a pro forma basis, had the sale been completed last year, the group's earnings per share would have risen to 3.31 US cents from 1.07 US cents, while net tangible assets would have increased to 16.04 US cents a share from 13.81 US cents.
Serial System executive chairman and chief executive officer Derek Goh said: "We have been invested in SPL for more than four years now. This deal with Anchorage Bridge Street is timely and particularly rewarding as the returns are extremely attractive."
"The sales proceeds will come in handy for our main distribution business and for strengthening our balance sheet," he added.
On a pro forma basis, the sale would have taken the firm's net gearing down to 82 per cent from 115 per cent.
While the disposal constitutes a major transaction under listing rules and would ordinarily be subject to a vote by shareholders, Serial System has received a waiver from the Singapore Exchange and will not need to obtain such approval.