Advanced Systems Automation, which manufactures equipment for the semiconductor industry, plans to go into a new core business by acquiring a shrimp business for $20 million.
In a series of announcements on Oct 28, ASA says it will acquire an entity called LSO Organization Holdings, which owns 50% of the total issued and paid-up share capital of British Virgin Islands-incorporated Lim Shrimp Organization.
The sellers are Lim Chen Chong, Victoria Lim Yu and Structured Capital Solutions Inc.
As at June 30, the target's book value was $0.8 million, and its net profits after tax was around $0.2 million for the six months to June.
According to ASA, LSO provides the technical know-how of shrimp farming to farms in Indonesia, China, Malaysia and Oman.
To fund this acquisition, ASA will first consolidate its shares in the ratio of 65 into 1.
See also: Sembcorp issues $350 mil of guaranteed notes due 2036 at 3.65%
Next, it will pay $12 million of the $20 million by issuing 184.62 million post-consolidation shares at 6.5 cents each. It will then pay the remaining $8 million in cash within 6 months from the completion of the deal.
Upon completion of the deal, ASA will be paying an introducer's fee of $1 million to Advance Capital Partners, whose sole director and shareholder is Tan Choon Wee.
The fee, equivalent to 5% of the $20 million transaction price, will be paid in the form of 15.38 million new shares.
To help fund the acquisition, ASA, in a separate announcement, says it will be issuing up to $20 million in the form of redeemable convertible notes to Advance Opportunities Fund I and Advance Opportunities Fund VCC, which are managed by Tan.
The notes will be issued at different tranches and carry an interest rate of 5% per year.
The deal is subject to the approval of ASA shareholders at an EGM to be called as well as the exchange.
According to ASA, there's increased demand for food security during and arising from the pandemic.
Many countries are "urgently strengthening" their food supply chain resiliency and security via different means such as sustainable aquaculture.
"With the current and ongoing release of treated waste water from a nuclear plant by Japan, many countries have also sought alternate seafood sources from aquaculture instead of wild catch," says ASA.
According to ASA, the deal can help it turn around from its loss-making position.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
"This, together with the positive business outlook for the target group, may allow the potential for growth in the market capitalisation of the company, an overall increase in
investor interest and, consequently, improvement in trading liquidity of the shares," says ASA.
