Singapore-listed paper miller UPP Holdings is regaining a majority stake in Canada's largest wholesale distributor of building materials, Taiga Building Products, for C$27.7 million (S$28.3 million).
In a filing with the Singapore Exchange yesterday, UPP said it has agreed to acquire 10 common shares and 9.2 million preferred shares of Kublai Canada from Genghis Sarl, which is controlled by a trust of which UPP director Tong Kooi Ong is the sole beneficiary.
The price tag includes UPP acquiring C$13.8 million of debt owed by Kublai Canada to Genghis Sarl. The debt bears an interest at 9 per cent per year.
Kublai Canada, a holding company, has a 15.8 per cent stake in Taiga, which is 49 per cent owned by UPP.
Upon completion of the deal, UPP will end up with a controlling 64.8 per cent stake in Taiga. This returns majority control of Taiga in the hands of UPP.
"Since the company's acquisition of Taiga, the business carried out by Taiga has become, and continues to be, one of the group's core businesses," UPP said.
UPP acquired a 58.3 per cent stake in Taiga in January last year. But following a restructuring of Taiga's then outstanding 14 per cent subordinated unsecured notes due 2020 on Nov 11 last year, UPP's shareholding in Taiga fell from 58.3 per cent to 49 per cent.
UPP Holdings' controlling stake in Taiga Building Products upon completion of the deal.
UPP said the proposed acquisitions are expected to be earnings-accretive.
The purchase consideration of C$27.7 million was derived by multiplying the number of Taiga shares held by Kublai Canada by the price per Taiga share of C$1.50.
This will be satisfied by UPP paying Genghis C$8.8 million in cash and issuing 73.4 million new shares at 26 cents apiece.
The cash component of the purchase consideration is expected to be satisfied from internal cash flows of the firm and external borrowings, UPP said.
As of March 23, Genghis and its concert parties have a 25.31 per cent stake in UPP.
Upon completion of the acquisitions, this will increase to 31.09 per cent of UPP's enlarged share capital.
Under Singapore's code on takeovers and mergers, Genghis and its concert parties will be required to make a mandatory general offer for the shares they do not already own, unless they are granted a waiver by the Securities Industry Council.
The deal is subject to approval by shareholders and obtaining a waiver, as well as UPP being satisfied that the proposed acquisitions do not require notification under the Competition Act (Canada).
Save for UPP's Mr Tong, none of the directors or controlling shareholders has any interest in the proposed acquisitions.
Assuming that the proposed acquisitions were completed on Jan 1, 2016, earnings per share of the company would have increased from $1.50 to $1.75.