SINGAPORE - Mainboard-listed Singapore Myanmar Investco (SMI) on Monday (June 4) announced that its subsidiary, Myanmar Infrastructure Group (MIG), has entered into a US$10.8 million (S$14.4 million) share sale agreement with Tiger Infrastructure for the proposed disposal of its 99.9 per cent-owned indirect subsidiary, TPR Myanmar.
TPR, which was incorporated in Myanmar in 2014, is a subsidiary of MIG, and the agreement includes the disposal of 9,999 issued ordinary shares in TPR, as well as all tower stock and power equipment stock held by TPR in its warehouse and its port.
TPR builds, leases and operates telecommunication infrastructure and towers in Myanmar. The remaining one issued ordinary share of TPR is held by a nominee of the company, SMI said.
Meanwhile, purchaser Tiger Infrastructure is involved in the supply of infrastructure engineering design and consultancy services. Its subsidiary Tiger Infrastructure Myanmar (TIM) Co is in the same industry as TPR and similarly builds, leases and operates telecommunication infrastructure and towers in Myanmar.
The sale consideration of US$10.8 million comprises US$9.8 million in cash for the sale shares - 10 per cent of this amount will be paid within three business days of the date of the agreement (June 1), with the balance paid on the completion date. In addition, US$1 million in cash for the sale stock, will be paid to MIG within three business days from June 1.
Net proceeds of US$10.7 million after deducting expenses, will largely go towards working capital, servicing bank loans and other operating requirements.
In an exchange filing on Monday, SMI noted that the telecom business is a "capital intensive undertaking". In light of the company's expansion into other businesses in Myanmar, the proposed disposal will allow the firm to focus its efforts on less capital intensive, and potentially better performing business segments for faster returns on investments, such as its duty-free and retail business, SMI said.
It added that the telecoms infrastructure market is undergoing rapid consolidation leaving limited opportunities for smaller players, and that TPR with its small market share, is likely to underperform its larger competitors.
The proposed disposal will also strengthen the group's balance sheet and improve its liquidity, allowing it to restructure its existing businesses to achieve a stronger financial performance, the group said.
The deal is subject to the company receiving shareholders' approval for the proposed disposal at a general meeting to be convened, and TPR owning and leasing 100 revenue generating towers to TPR's customers, among other conditions.
A material term of the agreement includes SMI providing buyer Tiger Infrastructure with office space for the staff of TPR for a period of up to six months after the completion date, at a one-time fee of US$50,000, payable within seven days of the completion date.
In the event that any sum due under the agreement is not paid by the deadlines stipulated, an interest of 6 per cent per annum will be incurred from the date payment is due, until the date of actual payment. Interest shall accrue on a daily basis and be compounded quarterly, SMI said.
The long stop date for the deal stands at Dec 31, 2018.
According to SMI, for the financial year ended March 31, 2018, the net asset value was US$5.54 million and net loss before tax attributable to the sale shares (including the sale stock) was US$6.56 million.
As part of the proposed disposal, MIG will forgive the debts owed by TPR. After adjustment for the waiver of the indebtedness, the net asset value of the sale shares (including the sale stock) would be US$11.7 million.
SMI is an investment and management company focused on the emerging economy of Myanmar. It has businesses in travel and fashion retail, food and beverage, and auto services.
As at 9.39am on Monday, the counter was trading at 30 cents apiece, up 3.45 per cent, or one Singapore cent.