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JEP Holdings to acquire supplier JEP Industrades
AEROSPACE engineering solutions provider JEP Holdings has entered into a sale and purchase agreement to acquire one of its suppliers, JEP Industrades (JEPI), from JEPI's two shareholders.
The group said the acquisition will allow it to diversify its earnings as well as cut costs.
The acquisition will be funded through the issuance of 120 million shares in JEP. Meanwhile, the group will receive S$1 million in dividends, paid from the earnings of JEPI.
Once the payment of this dividend has been completed, JEPI's subsequent net profit after tax would then be paid back to its original shareholders, up to a maximum payout of S$4 million, over FY2016 to FY2018.
JEPI is a trading company which markets cutting tools such as indexable carbide inserts, tool holders, milling cutters, boring bars, and drill bits.
Based on the unaudited management accounts as at June 30 this year, JEPI recorded a net profit of about S$1.8 million, and had net tangible assets of approximately S$7.1 million.
Chief executive of JEP, Joe Lau, said: "This vertical integration of JEPI, one of our existing suppliers, will enable a reduction of costs in their order fulfilment to us, while eliminating the leasing costs for their facilities as we will accommodate them on our own premises. Aside from the cost savings, the acquisition will diversify our revenue streams and should also strengthen our position in the competitive global market."