WE Holdings plans S$25m acquisition, equal-sized convertible bond issuance

WE Holdings has signed a non-binding memorandum of understanding to acquire marine sand supplier Hua Kai for S$25 million, and plans to issue an equal-sized convertible bond offering.

Hua Kai, which mainly services the land reclamation industry in South-east Asia, sources sand from Cambodia and Vietnam and has contracts for reclamation works in Singapore and Brunei. The company is wholly owned by Koh Lee Hoo.

The price of the acquisition will include S$8 million in cash and S$2 million of new shares upfront. The per-share price will be based on the current market price when a sales-and-purchase contract is signed.

WE Holdings will pay the remaining S$15 million in three S$5 million annual instalments provided Hua Kai achieves net profits of S$16 million in fiscal 2016, S$18 million in fiscal 2017 and S$20 million in fiscal 2018.

The total consideration may be lowered depending on an assessment of Hua Kai's net tangible assets and its ability to hit future profit targets.

WE Holdings, an electronics distribution business, said the acquisition is in line with plans to build a commodities arm.

The company plans to issue S$25 million of three-year, 8 per cent convertible bonds to help finance the commodity business, investments in Myanmar and working capital.

The bonds may be converted into WE Holdings shares at a 5 per cent discount to the company's five-day weighted average price upon notice of conversion. If WE Holdings is unable to pay the full principal upon maturity, it has an option to convert the shortfall into shares at the same conversion rate.

WE Holdings shares closed at 0.7 Singapore cent on Tuesday.