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China Environmental Resources: Extension for refund for failed acquisition was 'fair and reasonable'
CHINA Environmental Resources Group said that it is "fair and reasonable" to grant the vendor in a failed acquisition extra time to refund a deposit paid by the tree farmer and fertiliser producer.
China Environmental Resources in September 2014 terminated a long-brewing proposed acquisition of Clear Wisdom, a company that would give China Environmental Resources exposure to the China hospitality industry. Following the termination, the vendor, Lam Chun, was required within 14 days to refund HK$150 million (S$25.8 million) in deposit that had been paid by China Environmental Resources.
On June 18, the company announced that it had entered into a supplemental termination agreement with Mr Lam, giving him until Nov 19, 2015 to repay an outstanding HK$70 million of the refund plus interest. He had already paid HK$60 million on Nov 7, 2014, and returned HK$20 million with interest on June 18.
On Monday, China Environmental Resources said that because the outstanding amount of the refund was "a substantial amount", it was "reasonable for the vendor to request further time to arrange (the) settlement". In light of the fact that Mr Lam will have to pay interest, and that a share mortgage had already been executed in favour of the company by the target business, China Environmental Resources' directors considered the extension "fair and reasonable, and in the interest of the company and the shareholders as a whole".
China Environmental Resources shares last traded at 10 Singapore cents on Monday before the announcement, down by 13.8 per cent or 1.6 Singapore cents.