SINGAPORE - Wood products supplier Sitra Holdings (International) plans to diversify into the hospitality business through a deal to acquire a majority stake in a Bintan resort from the family of company chairman and chief executive George Chew.
The multi-part deal will involve Sitra acquiring a 54 per cent stake in Mapur Rocky Resort from Doris Chung Gim Lian and Chew Han Wei for $3.51 million, to be paid in 319.1 million new Sitra shares priced at 1.1 cents per share. Ms Chung is the wife, and Mr Chew Han Wei is the son, of Raffles Education Corp chairman and CEO Chew Hua Seng, who will receive the consideration shares as their nominee. Mr Chew Hua Seng is also the brother of Mr George Chew.
Mr Chew Hua Seng has also agreed to subscribe to a placement of 158 million new Sitra shares at the same per-share price as the consideration shares, which will raise $1.74 million of cash for Sitra.
Sitra and Mr Chew Hua Seng have further agreed to a call-and-put option agreement that gives either party the right to force a subscription of up to 255 million new Sitra shares by Mr Chew at 1.1 cent per option share, which could raise a further $2.81 million for Sitra. The options last for two years after the completion of the acquisition.
The issue price represents a 17.95 per cent premium to the volume-weighted average price of 0.9025 cent for Sitra share trades done on Feb 26, the last trading day before the signing of the agreement. It also represents a discount of 23.61 per cent to Sitra's last announced net asset value per share of 1.44 cents. Sitra shares were trading at one cent as at 9.52am on Thursday, after the announcement.
The deal will raise Mr Chew Hua Seng's stake in Sitra from the current 9.2 per cent to 44.47 per cent after he receives the consideration shares and completes the placement. If the option shares are fully taken up, his stake in the company will increase to 54.01 per cent. Mr Chew Hua Seng will be seeking a whitewash waiver from the Singapore Industry Council and shareholders to avoid having to make a general offer for the rest of the company's shares.
Mapur Rocky Resort is the holding company of PT East Bintan Resort, an Indonesian company created to acquire and develop a property on the Indonesian island of Bintan. The vacant property was valued at about $6.5 million as at Oct 1, 2018 by Colliers International and has an aggregate area of 123,534 square metres. Following the acquisition, Ms Chung will retain the remaining 46 per cent of Mapur Rocky Resort.
In justifying the deal, Sitra said that its core business of selling and distributing wood-based products has been loss-making since 2008. The acquistion will diversify the group's business and enable it to improve financial performance. The company plans to use proceeds from the placement and the options for general working capital.
Because Mr George Chew and Mr Chew Hua Seng are siblings, the deal is an interested-person transaction that will require shareholders' approval. Sitrawill appoint an independent financial adviser to assess the deal.