Mencast Holdings has proposed to dispose of its minority interest in Vac-Tech Engineering.
The company, through its subsidiary, Mencast Energy, along with Vac-Tech Engineering’s other shareholders, entered into a sale and purchase agreement (SPA) with Blue Planet Environmental Solutions on Dec 17. The SPA will see Blue Planet Environmental Solutions purchasing a 100% stake in Vac-Tech Engineering comprising three million issued and paid-up ordinary shares.
Blue Planet Environmental Solutions is a Singapore-incorporated waste management and upcycling solutions company.
Vac-Tech is 20% owned by Mencast Energy. Grand Victor holds the remaining 80% in the company.
The consideration for the purchase of all the shares in Vac-Tech is $42.5 million.
According to the filing, the full amount will be paid to the sellers in three tranches. The first tranche of $29.35 million, or 78% of the total consideration, will be paid upon the completion of the transaction.
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The second tranche is subjected to adjustments based on Vac-Tech’s last 12 months of normalised earnings before ebitda and amortisation to June 2023. It is also payable within 10 business days after the statement becomes available based on Vac-Tech’s management accounts.
The maximum amount payable under the second tranche is $6.8 million, and the minimum is zero.
The third and final tranche is subject to adjustments based on Vac-Tech’s last 12 months of normalised earnings before ebitda and amortisation to December 2023 and is payable within 10 business days after the statement.
The maximum amount payable under the third tranche is $8 million, which includes the deferred consideration. The minimum amount payable is zero. The deferred consideration refers to the $800,000 that will be paid to Blue Planet on the payment date for the third tranche, whether the third tranche is payable or not.
Based on its 20% stake, the maximum consideration Mencast Energy will receive is $8.83 million. This is based on the total sum of the first tranche payment of $5.87 million, the maximum second tranche payment of $1.36 million and the maximum third tranche payment of $1.6 million (which includes Mencast’s share of the deferred consideration).
The minimum consideration Mencast Energy will receive is $6.03 million, should the second and third tranche payments amount to zero.
The transaction is subject to certain conditions including the waiver granted by the SGX-ST of the requirement of Mencast’s shareholders’ approval for the proposed disposal.
According to Mencast, Vac-Tech, whose core business comprises mainly propulsion manufacturing and the management and treatment of waste, is a non-core business or asset.
Furthermore, the group had disposed of its 50% stake in Vac-Tech to Grand Victor in 2019 and “has no present intentions to increase its shareholding in Vac-Tech or to re-purchase any interest in Vac-Tech from Grand Victor”.
“Vac-Tech’s business operations are highly capital and labour intensive, and dependent on continued capital expenditure investments such as in machinery and equipment. Since the 2019 disposal, the group has ceased managing and funding Vac-Tech,” continues the statement released by Mencast.
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The proposed disposal is not expected to have a significant effect of Mencast’s existing operations and business.
Based on the shareholders’ agreement with Grand Victor in 2019, Mencast Energy is contractually obliged to complete the proposed transaction.
If the proposed disposal had been affected on Dec 31, 2021, Mencast’s net tangible assets (NTA) per share would have been at 6.20 cents instead of 5.61 cents.
If the proposed disposal had been affected on Jan 1, 2021, Mencast’s earnings per share (EPS) would have been at 1.95 cents instead of 1.46 cents.
Shares in Mencast closed 0.2 cent lower or 4.65% down at 4.1 cents on Dec 16.
