Serial System plans to sell a subsidiary into Axington Inc via a reverse takeover deal, which, if completed, will give group CEO Derek Goh control of another listed entity.
The deal, announced on Sept, 2 is Axington’s third known RTO attempt in just over a year to put behind its cash company status.
In their separate but related announcements, Serial System says it plans to sell Achieva Technology to Axington for not more than $27 million.
Axington will pay for the acquisition by issuing new shares at a price and quantum to be finalised.
Assuming Axington's last traded price of 19 cents and the $27 million price tag, its share base will be enlarged from 190.46 million to 1.12 billion, giving Serial System a stake of around 80% in Axington. Trading of Axington shares have been suspended since last August.
Achieva Technology, active mainly in Malaysia and Thailand, distributes IT parts, products, and software for brands such as AMD, Intel, Gigabyte, MSI, AOC, Philips, ViewSonic, ASRock, Apacer, Thermaltake and DynaBook.
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George Kho Wed Hong, the introducer of this deal, will be paid new Axington shares worth $500,000 upon completion of the transaction.
According to Serial System, by effectively giving Achieva its own listing, it can then be “financially independent” and have the platform to raise its own funds. Achieva’s management team will also be incentivised to “deliver the best possible value” to shareholders.
The split of Achieva from Serial System will have marginal effect on its balance sheet.
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On a pro forma basis, Serial System’s NTA will dip to 16.29 US cents per share from 16.41 US cents, given Achieva’s NTA of US$2.42 million as at Dec 31 2021.
For FY2021 ended Dec 2021, Achieva reported a profit after tax of RM7.6 million, or some US$1.83 million.
Serial System’s pro forma earnings per share will dip to 1.13 US cents from 1.24 US cents.
Axington, the purchaser, was in the news over the last couple of years from its association with the by now infamous Loh cousins, Terence and Nelson, who made headlines with their stated intention of buying UK football club Newcastle.
The announcement exposed them and their related entities to intense scrutiny and they were called out for making false claims. Their various ventures, including the ones they wanted to do via Axington, fell through.
The Lohs had wanted to turn Axington, which had sold its original accounting services business, into one focusing on “medical and consumer wellness.
By the time the Lohs took control of Axington, it was already a cash company and required under listing rules to find a revenue-generating business in order to maintain its listing status.
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Prior to the Sept 2 announcement with Serial System, Axington had already announced two earlier RTO attempts.
On July 18, Axington announced it has signed a non-binding MOU to acquire a group of foodstuffs makers including Mushan Food Industries.
The MOU lapsed a month later.
On July 8 2021, Axington announced plans to take control of a China-based IT services provider Veivo Web Technology for $405 million.
Similarly, the deal fell through a month later on Aug 7.
Serial System closed at 10 cents on Sept 2, down 4.67% for the day and down 7.27% year to date, valuing the company at around $90 million.
