Catalist-listed manufacturing company Metal Component Engineering (MCE) is acquiring an 85.07% stake in healthcare business Gainhealth for $4.25 million.
MCE has entered into a sale and purchase agreement (SPA) with three individuals to acquire 1,715 ordinary shares in Gainhealth. $3.8 million of the consideration will be settled via cash, while $481,000 will be settled through the issuance of 13 million new ordinary shares in MCE to the vendors at an issue price of 3.7 cents per share.
The vendors will also be entitled to a performance bonus amounting up to $5.1 million, should Gainhealth achieve a valuation of $11.6 million within 12 months from the SPA’s completion date. Of the amount, up to $4.4 million will be payable in cash, with the remainder to be settle via the issuance of up to 20 million new ordinary shares in MCE.
The acquisition will be funded through the MCE’s internal resources.
Gainhealth is a healthcare business that operates a general practitioner clinic with an in-house pharmacy known as Gainhealth Clinic and Homecare. The business also has an e-commerce arm that operates multiple online e-commerce portals. It currently has a team of 15 staff across Singapore and Malaysia.
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The main shareholder of Gainhealth is one Jagannathan Padmaja Sakthi, who holds 96.73% interest and is the sole director of the company. Following the acquisition, Sakthi will hold 13.93% of the company.
As of April 30, the book value of the sale shares totalled approximately $19,484, while the net loss attributable to the sale shares between the company’s date of incorporation on June 26 u[ until April 30 amounted to $99,630.
An independent valuation of Gainhealth conducted by Cushman & Wakefield VHS valued the company between $3.9 million to $5.2 million.
In its filing to SGX on June 8, MCE states that the acquisition is in line with its strategy to diversify beyond its manufacturing business into healthcare and e-commerce. Given the on-going Sino-US trade war and its potential impact on MCE’s manufacturing plant in China, MCE believes new revenue streams from Gainhealth will be beneficial to the group.
As at 9.18am, shares in MCE are down 1.4 cents or 15.56% lower at 7.6 cents.
Photo: Gainhealth Clinic and Homecare
