CHANGJIANG Fertiliser Holdings is eyeing the acquisition of a 50 per cent interest in Chiu Teng 8 Pte Ltd (CT8), which owns the Tagore 8 industrial building, from CTE Resources under a deal that will constitute a reverse takeover by SGX rules.
The deal involves the acquisition of 500,000 ordinary shares of CT8 for a total consideration of S$9,674,288, subject to adjustments based on the terms of the CT8 acquisition agreement.
Changjiang will issue over 580 million shares to CTE Resources or its nominees at the issue price of S$0.005 on completion of the CT8 acquisition. The remaining payment for the deferred consideration to be agreed by both parties will be settled in cash.
Changjiang has proposed to raise cash for the deferred consideration by securing a bank loan through mortgaging the unsold units at CT8's property, Tagore 8.
CT8's shareholders are CTE Resources on 50 per cent, Affluence Resource on 40 per cent and Chiu Teng Construction Co Pte Ltd on 10 per cent, noted Changjiang in a Tuesday stock exchange announcement.
In 2011, CT8 acquired a freehold site with a gross site area of approximately 143,310 square feet located along Tagore Industrial Avenue and commenced the development and construction of a light industrial building called Tagore 8.
Tagore 8 received its certificate of statutory completion on Sept 2, 2015. It is a freehold development classified as a B1 light industrial ramp-up property.
Since Tagore 8 was launched for sale in 2012, 110 units have been sold. As at the date of this announcement, 18 units, amounting to an aggregate gross floor area of 40,591 square feet, are unsold.
CT8 has a sales and marketing agreement with various real estate agencies to market units in Tagore 8 for sale.
For FY15, CT8 posted a profit after tax of S$20.7 million on a revenue of S$169.8 million.
The proposed acquisition of CT8 which is expected to be completed no later than Oct 1, 2016, will be subject to, among others, the approval of SGX and Changjiang's shareholders.
CTE Resources and its nominees shall also hold not less than 19.88 per cent of the enlarged issued and paid-up capital of Changjiang.
Changjiang added in Tuesday's stock exchange announcement that CT8 is a profitable outfit with a track record in real estate development.
"It is expected the company will be obtaining the CT8 shares at good value considering these will be pegged at a discount of about 20 per cent to the average selling price of comparable units sold in (the industrial building) Tagore 8," the company said.
The board of Changjiang believes the CT8 acquisition and the foray into real estate development will allow the company to have better prospects of profitability and ensure long-term growth.