SINGAPORE (Sept 3): Coffeeshop operator Kimly said former director Alain Ong Eng Sing was not the mastermind behind its listing and its acquisition of Asian Story Corporation (ASC).
On the contrary, Kimly’s executive director Vincent Chia Cher Khiang was the key person who dealt with the issue manager/sponsor during the IPO due diligence process. In addition, it was the owner of Wang Jia Ye of ASC who conveyed to Kimly his intention to sell ASC back in 4Q17.
The revelations were made by the F&B group in response to a number of queries raised by the Singapore Exchange after the local media reported details of the lawsuit against Ong by Japanese beverage giant Pokka.
Ong was the former deputy group CEO of Pokka Corporation (Singapore) and CEO of Pokka International. Pokka is accusing Ong of conspiring with others to divert business to ASC and for inflating the value of ASC in the runup to its acquisition by Kimly.
See: Kimly drawn into scandal involving former Pokka CEO Alain Ong
Ong, was removed from his posts in Pokka in September last year following internal investigations. Another former Pokka International employee, former commercial director Chin Ghim Wah, has also been named as a defendant in the lawsuit.
In a separate announcement on Nov 29 last year, Kimly revealed that its executive chairman Lim Lim Hee Liat and Chia were under investigation by the Commercial Affairs Department and the Monetary Authority of Singapore for a suspected offence under Section 199 of the Securities and Futures Act.
See: Kimly chairman and director under probe; $16 mil acquisition cancelled
In a bourse filing on Tuesday, Kimly said Pokka is one of its beverage suppliers. Ong, along with his sales representative, paid an introductory visit to the when he joined Pokka in or around 2008.
When the group was contemplating an IPO, Kimly said Ong was identified as a potential non-executive and non-independent Director due to his industry and business knowledge and experience. He was subsequently appointed as non-executive and non-independent director on Feb 15 2017, before the group’s IPO.
Like other non-executive and independent directors appointed for the IPO, Kimly said Ong was kept regularly updated on the IPO process and together with the other directors. Ong also contributed and provided feedback and views to the management of the group leading up to the group's IPO.
During his time with the Kimly, Ong was also appointed a member of the audit committee and remuneration committee of the company.
Ong ceased to be a director when he did not seek re-election at the company's Annual General Meeting last January, citing other principal commitments as his reason for resigning.
Behind the circumstances leading to the ASC acquisition, Kimly said ASC’s owner Wang had approached the company to convey his intention to sell ASC.
The company then began to evaluate ASC from January to March 2018, before signing a non-binding term sheet last April. This was followed by a due diligence exercise, a valuation of ASC, and the sale and purchase agreement (SPA) negotiation from April to June 2018. The SPA was signed on July 2, 2018, before being rescinded on Nov 29.
See: Kimly acquires seller of Asian Story drinks for $16 mil
In its clarification of ASC’s ownership, Kimly said ASC was incorporated on December 15, 2009 by Wang. Seah Li Ling (SLL), the wife of former Kimly executive director Glenn Seah, became a shareholder of ASC on Aug 13, 2010 through a new subscription, meaning the vendor and SLL each held 50% of the shares in ASC.
On March 31, 2015, Wang transferred his 50% stake in ASC to SLL and subsequently acquired 100% of the shares in ASC from SLL on Dec 13, 2016. As at the date of the SPA and leading up to its completion, the vendor had represented and warranted he owned legally and beneficially 100% of the shares in ASC, said Kimly.
Among other things, SGX noted that in Kimly's earlier announcement on the proposed acquisition of ASC, it was stated that ASC is involved in the manufacturing and distribution of beverages, although the involvement of Pokka was not mentioned.
Local media also reported last week that based on Pokka's filing, ASC never had any manufacturing and distribution capabilities, and appeared to have only one employee.
In response, Kimly said ASC owns the brands of its Asian beverages, drinking water and other juices, and as part of its "asset light business strategy", engages third-party manufacturers such as Pokka to produce its products.
Due to the nature of its business model and operations, ASC had two employees at the time of the acquisition, comprising Wang who was assisted by a marketing executive.
Since January last year, ASC has appointed Pokka as its exclusive distributor for its ASC branded beverages, which are mainly distributed to coffeeshops, supermarkets and minimarts in Singapore, Kimly said, adding that the company had not provided these details in its announcement on July 2, 2018 due to their "commercial sensitivity".
Regarding the present duties of the directors involved in the investigation, Kimly said that executive chairman Lim continues to oversee the overall performance of the group, while executive director Chia is responsible for strategising and implementing key improvements to the group's processes.
Kimly said it is not aware of any formal charges made against the directors, and that the other board members are of the view that the directors should continue to discharge their responsibilities to ensure business continuity.
Shares in Kimly closed flat at 22 cents on Tuesday, down 2 cents year to date.
