Catalist-listed metal-stamping firm CFM Holdings has on June 3 entered into a sale and purchase agreement (SPA) to acquire 51% of the issued share capital in SING-SWE MM Biotechnology, a distributor of Covid-19 testing kits.
The acquisition is subject to shareholders’ approval, to be sought an extraordinary general meeting (EGM) to be held at a later date.
Under the SPA, CFM will acquire the shares for an aggregate consideration of $6.1 million, which will be satisfied through the issuance of up to 120 million new ordinary shares in CFM at an issue price of 5.1 cents per share.
The payment for the consideration has been structured on an “earn-out” basis where CFM will only pay out the full amount of the consideration if SING-SWE MM achieves a target group npat of $2 million by November.
In the event that SING SWE MM earns in excess of the targeted npat, the vendors will be entitled to an additional cash payment of 25% of the excess group npat amount.
The vendors for the transaction are the current shareholders of SING-SWE MM, comprising two individuals - Wang Xinmeng and Gao Hong, who respectively hold 15% each in the company - as well as New Energy Industry Sweden (NEIS), which holds 70% in the company. NEIS’ shareholders are listed as Fang Huasheng (83%), Sven Eriksson (5%), Xu Xiaojun (2%), Yu Jijiang (5%), and Cheng Ruikai (5%).
Following the transaction, CFM will hold a 51% stake in SING-SWE MM, with NEIS to hold the remaining 49%.
Currently, SING-SWE MM has an issued and paid-up share capital of $100 comprising 100 ordinary shares.
According to CFM’s filing to SGX, SING-SWE MM, a Singapore company that was incorporated in early May, holds exclusive distribution rights to certain viral test detection kits, including nucleic acid quick tests, rapid antigen tests, antibody rapid tests, and thalassemia screening kits in Europe, Africa, South Asia, South-East Asia and the Middle East. SING-SWE MM is currently licensed to distribute test kits in the aforementioned regions through the master distributor, NEIS, which is in turn licensed by the manufacturer of the test kits, Changsha Sanji Biological Technology Co.
Changsha Sanji is a subsidiary of Boai NKY Medical Holdings, which is listed on the Shenzhen Stock Exchange. SING-SWE MM is also in the process of obtaining the rights to distribute the test kits in Japan and South Korea.
See also: Investor Ang Hao Yao no longer substantial shareholder at CFM Holdings
However, CFM also disclosed that the information on SING-SWE MM has not yet been independently verified by CFM as of the date of its filing, with due diligence to be conducted throughout the course of the transaction and prior to completing the acquisition.
CFM says the consideration of $6.1 million was decided after “substantive negotiations” and takes into account a "price-earnings ratio of approximately three times that it is paying for its 51% stake" in SING-SWE MM.
Pursuant to the transaction, CFM also announced that subject to the approval of the shareholders, the company intends to diversify its business and expand its core business to include the distribution and sale of viral test and detection kits and other pharmaceutical products.
Shares in CFM closed at 6.6 cents on May 30 before trading was halted on May 31.
