SIIC Environment Holdings plans to buy a China-based water treatment business in a deal valued at about 1.55 billion yuan (S$348.3 million) in cash and shares, the water specialist announced late Tuesday.
SIIC said it plans to buy all of Global Envirotech Investment, which in turn holds an indirect 92.15 per cent stake in Fudan Water Engineering and Technology Co, from Global Environment Investment. SIIC will pay 151.7 million yuan in cash and issue 1.56 billion new shares, or 16.3 per cent of the existing shares, at 13.2 Singapore cents apiece. The total consideration includes 479.18 million yuan that will be used to pay off an outstanding debt.
The issue price for the consideration shares represents a 12.2 per cent discount to the volume-weighted average price of SIIC shares on Tuesday. SIIC stock closed at 15 Singapore cents on Tuesday before the announcement.
The share portion of the consideration will be adjusted if SIIC manages to complete a proposed consolidation of five shares into one. The share consolidation plan was announced one day before the acquisition.
SIIC's controlling shareholder, Shanghai Industrial Holdings, which holds a 41.85 per cent interest in SIIC, will provide a loan to SIIC to help fund the acquisition.
SIIC said the net profit of the Fudan Water Group that is attributable to a 92.15 per cent stake was 89.4 million yuan in 2014. If the acquisition had been completed in 2014, it would have increased SIIC's earnings per share to 0.0331 yuan, from 0.029 yuan.
"The proposed acquisition is a strategic addition and complementary to the group's existing business and operational capabilities," SIIC said in its announcement. "In addition, the location of the target group has a strategic significance to the group as it would potentially serve as a platform for the group to secure more opportunities in the respective regions."