CPH to acquire fintech firm oCap in RTO
Singapore
PRINTED circuit board manufacturer CPH on Thursday signed a conditional sale and purchase agreement to acquire fintech solution provider oCap Management from Delphinium Capital for S$61.8 million, in what will result in a reverse takeover (RTO) of CPH. oCap Management is an alternative financing solution provider headquartered in Singapore, offering four main products for small and medium-sized enterprises (SMEs). They are payment receivables financing, cash advances, trade financing and working capital.
The S$61.8 million will be satisfied by the issuance of more than five billion new CPH shares at S$0.012 apiece; and Delphinium, an investment company with a fintech and regulated financial services assets portfolio, will become the single largest shareholder of CPH with a 80.34 per cent stake.
CPH independent non-executive chairman Lee Teong Sang said at a media briefing that the printed circuit board business has been challenging of late, with strong competition from Taiwanese and Chinese factories.
"We have been looking for the last two years at options to diversify and a few months ago, a common business friend introduced us to oCap. We found the business to be very relevant and in an industry that we believe is growing," said Mr Lee.
Noting that oCap is profitable with a highly scalable business model, he said the proposed acquisition would enable CPH to appeal to a broader base of investors. He added that CPH will look into phasing out its existing circuit printing business, but will focus on the new business in the near term.
oCap CEO Carlos Haeuser said that the reverse takeover was ideal for his company to achieve the transparency and credibility associated with the Catalist board, given that oCap's business involves lending and trust relationships.
It targets cash flow problems that SMEs grapple with, such as significant delays between the sale of goods and the funds being credited when customers pay via credit card. Some have also complained about filling out extensive paperwork for cash advances to purchase additional stock or hire more staff, only to have their applications rejected by banks. "This is a problem in growth and restocking, and how the merchants can actually act to grow and run their businesses," said Mr Haeuser. "The question here is specific to SMEs, since larger banks won't take smaller merchants."
The fintech company partners acquiring institutions, which are mainly financial institutions such as banks which settle credit card transactions, to gain access to merchants who have track records of at least two years and are less likely to default on their loans. It uses artificial intelligence and algorithms to assess their risk profiles before providing them with the financing products, and continues to monitor clients' ability to repay the funds throughout the loan tenures.
The proposed acquisition takes into consideration Delphinium's representation and warranty to CPH that oCap shall achieve a minimum profit before tax of US$5 million for the financial year ending Dec 31, 2018. oCap's profit before tax at the end of 2017 was US$1.6 million. The deal is subject to the approval of CPH's shareholders at an extraordinary general meeting.
CPH has appointed PrimePartners Corporate Finance as its financial adviser and full sponsor for the proposed acquisition. Tito Isaac & Co is acting as legal adviser for Delphinium and oCap. Its managing partner, Tito Shane Isaac, is also an independent director of CPH.
CPH shares closed at 0.9 Singapore cent on Thursday after the announcement, up 0.1 cent.
