NEO Group, a food catering company, said on Thursday that it plans to buy a 55 per cent stake in Thong Siek Holdings Pte Ltd (TSH), known for its "DoDo" brand of fishballs and crabsticks, for S$7.35 million.
The acquisition of TSH, which has two production facilities operating in Senoko (Singapore) and Johor Baru, will be payable in cash and new shares.
"This upstream acquisition is in line with our value proposition as a fully-integrated catering solutions provider, enhancing our supply chain and providing a vertical integration process that will expand our manufacturing business,'' Neo Kah Kiat, Neo Group's founder, said.
Mr Neo, who is also Neo Group's chairman and CEO, said the group intends to leverage Thong Siek's expertise in food manufacturing to strengthen its new central kitchen's operations and reap economies of scale and synergies from the integration and streamlining of processes.
"The acquisition will also allow the group to create new business-to-consumers income streams, expand our customer base and market segments, while giving us access to a large distribution network across 22 countries globally," he said.
Apart from Singapore and Malaysia, Neo Group intends to set up a marketing office in the UK to expand into new markets such as Europe, the Americas and Hong Kong.
As at end-2014, the net tangible assets of Thong Siek Group were about S$4.08 million and the net loss of Thong Siek Group for the financial year ended Dec 31, 2014, was about S$0.56 million.
Neo Group had commissioned a valuation to assess the value of Thong Siek Group, which came in within S$11.6 million to S$24.0 million as at Dec 31, 2014, subject to some assumptions.
Mr Neo will assume the role of acting CEO of TSH. TSH's finance function will be fully integrated into Neo Group's finance processes and oversight following the acquisition.
Neo Group expects to start consolidation of TSH's financials from the financial year ending June 30, 2015.