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Chip Eng Seng files suit after Australian childcare business acquisition falls through
MAINBOARD-listed Chip Eng Seng announced late on Wednesday the termination of a contract-of-sale relating to the proposed acquisition of a childcare business in the Australian state of Victoria, as well as the commencement legal proceedings for a refund of the deposit.
According to the contract, guarantors Aditya Singh and Tashika Setia jointly and severally guaranteed the performance by the vendor Tarneit West Childcare of its obligations. A deposit of A$350,000 (representing 10 per cent of the purchase price for the business) was paid by Chip Eng Seng’s wholly-owned subsidiary Penn Junior TW to the vendor’s solicitors, and held in trust pending completion of the proposed acquisition.
The completion was subject to certain conditions, including Penn Junior TW obtaining the relevant licences, approvals and permits required to operate the business. If the conditions are not satisfied by April 1, the long-stop date, the contract of sale would terminate automatically and the deposit refunded immediately to Penn Junior TW.
According to Chip Eng Seng, Penn Junior TW asserted that the conditions precedent relating to the Victorian Department of Education and Training’s approval for kindergarten funding had not been fulfilled or waived by the long-stop date.
However, the vendor claimed that conditions had been satisfied and that Penn Junior TW’s failure to effect completion, notwithstanding receipt of a notice of default from the vendor, had led to the termination of the contract of sale, and that the vendor’s solicitors were thus entitled to release the deposit to the vendor.
On Tuesday this week, the vendor’s solicitors informed Penn Junior TW’s solicitors that the deposit would not be refunded.
On Wednesday, Penn Junior TW commenced legal proceedings in the Supreme Court of Victoria against the vendor and the guarantors for a refund of the deposit.
The commencement of the legal proceedings is not expected to have a significant impact on the net tangible assets and earnings per share of the company for the current financial year ending Dec 31, 2020.