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Alpha Energy seeks S$20m funding for diversification bid; KPMG resigns as its auditor
ALPHA Energy on Wednesday said it is proposing a potential S$20 million fundraising to support its bid to diversify into the education services business.
The Catalist-listed oil firm on Tuesday entered into a conditional sale and purchase agreement with vendor Kydon Holdings for the proposed acquisition of Kydon Learning Systems Institute (KLSI) - a Singapore-based ed-tech business - for S$12 million in cash and stock.
The proposed KLSI deal came after Alpha Energy entered into a non-binding term sheet with investor Didi Investments on July 6 for the latter's potential capital investment of S$20 million via a convertible loan, subject to definitive agreements to be entered into between both parties.
Didi Investments is involved in the learning and education business in Japan. It was identified and introduced to Alpha Energy through RSM Corporate Advisory, which will be paid an introduction success fee of 171.4 million Alpha Energy shares.
Proceeds from the convertible loan will be primarily used to fund the proposed acquisition of KLSI and retained for future investments in the learning and education services sector.
The five-year convertible loan has an interest rate of 6 per cent per annum and a conversion price of 0.35 Singapore cent per share, according to Wednesday's regulatory filing.
The conversion price represents a discount of 89 per cent to the volume-weighted average price of 3.2 Singapore cents per share, based on the trades done on Nov 13, 2019 - the last full market day before the term sheet was signed.
The principal amount of S$20 million will be set off against an earlier S$1 million loan provided by Didi Investments to fund Alpha Energy's corporate expenses.
As part of conditions to the utilisation of the convertible loan, Didi Investments chief executive Yoshiyasu Naruse will be appointed as a director to the board of Alpha Energy.
The convertible loan is subject to Alpha Energy having entered into binding settlements with all existing creditors, on terms acceptable to Didi Investments.
Through the potential diversification into providing learning and education services, Alpha Energy is looking at generating additional revenue streams while waiting for the situation in its current core business of exploration, exploitation and production of oil to improve.
The company said it was introduced to Didi Investments - which is familiar in the education services business - and subsequently presented with an opportunity to take part in the proposed acquisition.
Alpha Energy added that in contrast to its current core business, the business of providing learning and education services is less capital intensive and has greater growth potential.
"The Covid-19 pandemic had also presented more opportunities, demand and faster adoption of e-learning solutions in the ed-tech space," the company said.
Alpha Energy's board believes there would be potential synergies and growth to be realised in the future due to the investor's potential capital investment, the viability, profitability and growth of KLSI's business and the general outlook of the education sector.
Moreover, Didi Investments has other investments in the education services sector, where its subsidiaries deliver educational content through classroom and online platforms.
KLSI has also been profitable for the last three financial years with a growing business presence in the ed-tech sector. Alpha Energy added that KLSI also has "a proven track record" and an established clientele which includes government agencies and major tertiary institutions in Singapore.
Established in Singapore in 2012, KLSI is an e-learning provider with more than 30 personnel comprising learning and visual consultants, designers, programmers, project and testing managers. Its core services are in the learning domain of education and training, people development, performance improvement, and knowledge mobilisation.
KLSI is the sole legal and beneficial owner of MQ Spectrum and Kydon Learning Systems.
MQ Spectrum is a system integrator established in Singapore, while Malaysia-established Kydon Learning Systems supports KLSI's projects in the design and development of online creative learning experiences. Besides supporting KLSI in its projects, Kydon Learning Systems has also secured Malaysia clients for similar services.
Alpha Energy will convene an extraordinary general meeting (EGM) "in due course" to seek shareholder approval for the proposed acquisition of KLSI, the potential capital investment and the proposed placement of shares to a placement agent to settle outstanding debts with existing creditors.
Alpha Energy separately announced on Wednesday that KPMG resigned as its auditor, following consent from the Accounting and Corporate Regulatory Authority (Acra).
KPMG's resignation took effect upon receipt of Acra's consent on Tuesday, according to the regulatory update. In its notice of resignation, KPMG said the resignation was a result of Alpha Energy's decision to stop engaging the former as an auditor.
It added it was not able to commence the audit for fiscal 2019 in view of the long outstanding fees due for fiscal 2018.
In place of KPMG, Alpha Energy has appointed Nexia TS Public Accounting Corporation, effective Tuesday, as auditor, a move approved by shareholders in an EGM on June 29. Nexia TS will hold office until the next annual general meeting of Alpha Energy has concluded.
Alpha Energy called for the suspension of its shares on Nov 18, 2019.