SINGAPORE - Singapore-listed paper mill company, UPP Holdings, is regaining a majority stake in Canada's largest wholesale distributor of building materials, Taiga Building Products (Taiga), for C$27.7 million (S$28.2 million).
The acquisition price includes UPP acquiring C$13.8 million of debt owed by the target company, Kublai Canada, to Genghis Sarl (Genghis). The debt bears interest at 9 per cent per year.
In a filing with the Singapore Exchange (SGX) on Friday (March23), UPP said that it has entered into a sale and purchase agreement with Genghis to acquire 10 common shares without par value, and 9.2 million preferred shares with a par value of C$1 each in the authorised share structure of Kublai Canada.
In addition, Kublai Canada holds 18.5 million shares representing a 15.8 per cent stake in Taiga.
UPP has a 49 per cent stake in Taiga. Upon completion of the proposed acquisitions - which include the acquisition of the purchased shares and the purchased debt - UPP will have an aggregate interest of about 64.8 per cent in Taiga.
On Jan 31 last year, UPP had acquired 19 million shares representing 58.3 per cent of the capital of Taiga. "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.
Following Taiga's restructuring of its then-outstanding 14 per cent subordinated unsecured notes due 2020 on Nov 11, 2017, UPP's shareholdings in Taiga decreased from 58.3 per cent to 49 per cent.
Thus, the proposed acquisitions if and when completed, will enable UPP to regain its majority stakeholding in Taiga. UPP added that 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 as agreed between the parties.
This amount will be payable to Genghis with C$8.8 million in cash, along with the issuance of 73.4 million consideration shares at an issue price of S$0.26. The cash component of the purchase consideration is expected to be satisfied from the internal cash flows of the company and external borrowings, UPP said.
As at March 23, Genghis and its concert parties have a 25.31 per cent stake in UPP. Upon completion of the proposed acquisitions, this will be increased to 31.09 per cent of UPP's enlarged share capital.
This means that Genghis and its concert parties would be required to make a mandatory general offer for the shares they do not already own, unless it is granted a waiver by the Securities Industry Council (SIC).
Among other things, the deal is subject to approval by shareholders and the SIC's waiver, as well as UPP being satisfied that the proposed acquisitions do not require notification under the Competition Act (Canada).
Genghis is controlled by a trust of which UPP's director, Tong Kooi Ong, is the sole beneficiary. Save for 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 will increase from S$1.50 to S$1.75.
Shares in UPP last traded down 2 per cent, or 0.5 Singapore cent, to S$0.24 apiece on Thursday.