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Chew's Group reaches deal to sell units to Malaysian poultry farmer for S$11m
CATALIST-listed Chew's Group announced late Thursday that it reached and signed an agreement to sell all the issued and paid-up shares of four subsidiaries - Chew's Agriculture, Chew's Engineering Services, Chew's Group Investment and Chew's Group Marketing - to Malaysia's Huat Lai Resources Bhd for S$11 million in cash.
The egg producer said the proposed disposal, first announced on Feb 9, will result in an estimated loss of around S$1.4 million, taking into account expenses of around S$3.2 million related to the transaction.
But the transaction will also translate into an equity value of S$0.62 per share after accounting for the fact that the sale subsidiaries will pay out all of their cash and bank balances as at March 31, 2018 to Chew's Group prior to completion. In initial negotiations, the amount of cash retained from the sale subsidiaries had been set at S$41.6 million.
The estimated equity value is a 13 per cent premium to Chew's Group's last traded share price of S$0.55 per share on March 6, 2018.
On completion of the deal, Huat Lai will build a new farm along Neo Tiew Road, purchased pursuant to a lease agreement between Chew's Agriculture and the Singapore Land Authority.
The company intends to declare a dividend to shareholders for their "continuing support" and loyalty to the company, Chew's Group said. The company and the sale subsidiaries will also make a one-off bonus payment to employees of the sale subsidiaries before completion.
Huat Lai Resources, one of the largest broiler and layering producers in Malaysia, has already paid a S$2.5 million cash deposit, and will pay the remaining S$8.5 million in cash on completion of the deal.
The company intends to retain the employees of the subsidiaries in the sale, in line with their employment contracts.