CES Hospitality, the wholly-owned subsidiary of Chip Eng Seng Corporation, has entered into a joint venture (JV) with Ariva Hospitality on Jan 31, forming the joint venture company (JVC) CES-Ariva Hospitality.
Ariva Hospitality is a Singapore-incorporated company that is also in the hospitality management business with a particular focus on serviced residences.
The JV will provide management services to hotels and serviced residences as well as provide technical consultancy, advisory services and marketing services to the hotels and serviced residences.
In addition, the JV will train hired staff to management the day-to-day operations of such hotels and serviced residences.
CES Hospitality is the sole shareholder of the JVC, holding 350,000 ordinary shares with a capital of $350,000, fully contributed by the company.
Under the terms of the joint venture agreement (JVA), Ariva Hospitality will contribute $150,000 to the JV within 30 days from the date of the agreement; after which, CES Hospitality will own a 70% stake in the JVC. Ariva Hospitality will own the remaining 30% in the JVC.
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The JVA also contains non-compete and non-solicitation undertakings to restrict the JV partners from competing with the JVCo’s business.
Separately, CES Hospitality has also entered into a shareholders’ loan agreement with Ariva Hospitality and the JVCo, where the JV partners have agreed to provide the JVCo a loan facility of up to $10 million to fund the JVCo’s working capital requirements.
Each shareholders’ loan to be drawn down under the loan facility will be provided by the JV partners according to their respective shareholding percentage under the JVCo.
The JVCo is entitled to request to draw down from the loan facility during the period commencing from the date of the shareholders’ loan agreement and end on either the date on which the loan facility is fully drawn down, or the date of termination of the JVA.
CES Hospitality has also entered into a corporate services agreement with the JVCo where the JVCo has appointed the former as the corporate services manager. As corporate services manager, CES Hospitality will provide certain administrative support, accounting, human resources and information technology services to the JVCo for a monthly fee.
According to Chip Eng Seng, the group has been looking at opportunities to broaden its hospitality business portfolio by acquiring hospitality assets as well as by building up its capability to provide management services to hotels and serviced residences. The provision of management services to hotels and serviced residences will be a complementary extension of the group’s hospitality business.
Interested person transaction (IPT)
Tang Dynasty’s Gordon Tang and Celine Tang are the controlling shareholders of Chip Eng Seng Corporation; Celine Tang is the non-independent and non-executive director and non-executive chairman of the company. Ariva Hospitality, on the other hand, is an indirect wholly-owned subsidiary of Tang Dynasty.
Under the listing manual, Ariva Hospitality is defined as an associate of Gordon and Celine Tang, while the JVCo is an associate as well as an “entity at risk” of Chip Eng Seng Corporation.
Accordingly, the participation by CES Hospitality and Ariva Hospitality in the JV, the provision of the services by CES Hospitality under the corporate services agreement and the provision of each shareholder loan by both companies are deemed IPTs.
Shares in Chip Eng Seng closed 0.5 cent higher or 1.18% up at 43 cents on Jan 31.
