Fabchem China, the manufacturer of initiation systems and detonating cords for explosives, has entered into a non-binding term sheet with three other investors to acquire about 71.26% of the shares in Renewable Power Management for $22 million on Oct 12.
The purchase consideration values the latter at $30 million for 100% of its shares.
The investors, Valiant Investments, GCAP Australia Investments and Gazelle Capital, are investment holding companies representing the majority investors that acquired the company in 2012.
Following the proposed acquisition, the investors will seek to have Renewable Power Management’s shareholders sell their respective shares to Fabchem China. Upon the completion of the acquisition, there will be a “reverse takeover” of Fabchem China under Chapter 10 of the SGX-ST listing manual.
Chapter 10 in the manual sets out the rules for “significant transactions by issuers, principally acquisitions and realisations and the provision of financial assistance”.
Under the terms of the acquisition, Fabchem China will transfer the listing and quotation of its shares to the Catalist board of the SGX-ST from the Mainboard.
The group says it will appoint a Catalist sponsor as the financial adviser for the proposed acquisition.
Following the proposed consolidation, the issue price will be listed at a minimum of 20 cents under Catalist rules.
Renewable Power Management is an Australian-incorporated company that currently owns and operates a biomass cogeneration power plant in Queensland, some 50km south of Brisbane.
The plant has a rated capacity of 30 MW and is accredited with the Australian Clean Energy Regulator.
“The acquisition of the target [Renewable Power Management] represents a good opportunity for the group to expand and diversify its businesses and operations, with a view to achieving more consistent and sustainable financial growth,” says Fabchem China in an SGX filing dated Oct 12.
Fabchem China’s sole operating subsidiary Shandong Yinguang Technology Co has been affected by new government regulations restricting the production and sales of its commercial explosive products over the past few years, which has affected the group’s overall business performance, it said.
The group added that it intends to dispose Shandong Yinguang Technology for a consideration of between $15-$20 million, payable in cash.
Fabchem China adds that its controlling shareholders Henry Wee and Sun Bowen will not dispose their existing shares until the conclusion of the group’s extraordinary general meeting (EGM). Wee and Sun will also vote in favour of the proposed acquisition.
Shares in Fabchem China closed flat at 15 cents on Oct 12.
