Thong Siek Global, the wholly-owned subsidiary of Neo Group Limited, on Feb 3, entered into a legally binding term sheet for the proposed acquisition of Royale International Food Industries (RIFI) as well as its owners Ng Soon Koon Kenny and Wong Khuang Lii Melvin.
Under the term sheet, Siantan Frenzies Snacks and Royale International Trading will transfer its businesses to RIFI. Following which, Thong Siek will acquire a stake in RIFI by way of an issue and allotment of 105 new ordinary shares in the share capital of RIFI to Thong Siek.
The 105 shares represent 51% of the share capital of RIFI upon the completion of the proposed acquisition.
The acquisition consideration of $1.02 million, will be fully paid in cash by way of a capital injection after the execution of the share subscription agreement.
RIFI, which was incorporated in Singapore in July 2018, is primarily in the business of manufacturing snacks under its flagship brand, Crusty’s.
As at Feb 3, RIFI has an issued and paid-up share capital of $100 comprising 100 ordinary shares.
Siantan and Royale are both limited liability partnerships established in June 2015 and May 2017 respectively.
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Crusty’s offers a wide variety of ready-to-eat products such as potato chips, fish skin and soy-based snacks.
The Crusty’s snacks are available in Singapore across supermarket chains, convenience stores, major petrol kiosks and cinemas.
The range is also exported to overseas markets including Australia, Canada, China and US.
Based on the unaudited financial statements of the RIFI group for the FY ended Dec 31, 2019 the net tangible asset value was approximately $0.8 million and the profit before tax was about $0.3 million.
Once the acquisition is completed, Thong Siek will have a 51% stake in RIFI, with Ng and Wong holding stakes of 34% and 15% respectively.
“We see this latest move as a strategic fit for our food manufacturing business given RIFI’s established position as Singapore’s premium snack manufacturer through its flagship brand – Crusty’s. With this acquisition, we will be gaining an immediate foothold and diversifying into the fast-growing snack food business that caters to younger generation consumers,” says Neo Group’s founder and chairman Neo Kah Kiat.
“Additionally, with the consolidation of our manufacturing capabilities under Thong Siek Global, this will enable us to lower our snack manufacturing costs and reap economies of scale through synergistic functions across manufacturing, marketing, procurement, and operational departments,” Neo adds.
“The acquisition is a follow through of our plans for the manufacturing business, to ride on increasing consumer demands in existing and complementary product ranges. The diversification into snack food products further broadens the group’s revenue stream, with the added benefit of expanding into new overseas markets.”
“Moving forward, where possible, we will also seek to integrate automation into production lines and adopt technological solutions to increase productivity and profitability,” he says.
Shares in Neo Group closed 0.5 cent lower or 0.9% down at 52.5 cents on Feb 3.
