Broadway to sell entire manufacturing business for US$50m

MAINBOARD-LISTED Broadway Industrial Group has inked a conditional sale and purchase agreement to sell its entire business of manufacturing actuator arms and related parts for US$50 million.

The proposed disposal to Chinese company Suzhou Gefan Hardware And Plastic Industrial Co requires the approval of Broadway shareholders, and will result in Broadway becoming a cash company.

Broadway's non-executive director Lew Syn Pau and Lau Leok Yee, who collectively own a 41.2 per cent stake, have each provided an undertaking to vote in favour of the proposed disposal.

If key shareholders oppose it, Broadway will have to pay a fee of US$2.5 million to the buyer, said the company in a statement to the Singapore Exchange on Thursday.

Alternatively, if Gefan's board opposes it, there will be a payment of US$2.5 million from the Chinese company to Broadway.

Book value of the shares and assets in the proposed disposal is about US$33 million. The net proceeds from the disposal, taking into account all costs and expenses including employee severance costs, are estimated to be about US$43.9 million.

But the land and buildings where the Shenzhen manufacturing facility is located are not part of the assets for sale. And Broadway will be entitled to lease 20,750 square metres of the property to Gefan at 20 yuan (S$4) per square metre per month for at least two years.

Broadway's board thinks that the price of US$50 million is "fair and reasonable", and the deal presents a good opportunity to unlock value for shareholders. Broadway, having strengthened its balance sheet, will be able to explore more fully the various options available, the board adds.

Shareholders are to note that under Rule 1018 of the Listing Manual, if the assets of a listed firm consist wholly or substantially of cash or short-dated securities, trading in its shares will normally be suspended.

Only until the company has a business which is able to satisfy the bourse's requirements for a new listing, the suspension be lifted.

If it is unable to satisfy the requirements for a new listing within 12 months from the time it becomes a cash company, subject to any extension as may be approved by the bourse operator, the firm will be delisted.

Broadway shares closed at S$0.168 on Wednesday, and it requested a trading halt on Thursday morning before markets opened.