EMS Energy executes deal to inject shipyard business

Singapore

CATALIST-LISTED offshore and marine engineering company EMS Energy on Thursday said it has executed a definitive sale and purchase agreement to acquire a 52.76 per cent stake in Vietnamese shipyard, Nosco Shipyard Joint Stock Company.

With this deal, the firm intends to diversify into the business of ship repair, module construction and shipbuilding. As this represents a diversification of its existing business and a change in risk profile, EMS intends to seek shareholders' approval at an extraordinary general meeting (EGM) to be convened, it said.

The board believes that this move will allow it to acquire a new business that could "potentially resolve its financial and business viability issues". Having considered the target's fully operational shipyard with immediate cash flow, a new experienced management team appointed in March 2019 and the market demand for ship repairing, EMS is of the view that the target can contribute to its earnings.

EMS intends to buy about 27.9 million shares in Nosco Shipyard from Vietnamese construction firm, Son Truong Co, and NVS Holdings (NVSH) - a company controlled by EMS chairman and chief executive Ting Teck Jin.

In addition, EMS will also commission an independent business valuer to conduct an equity valuation on the 52.76 per cent interest of the target company.

The indicative amount payable by EMS is represented by a 22 per cent discount on this valuation. The amount will be satisfied by the allotment of new EMS shares at an issue price of 0.15 Singapore cent, or as adjusted following any share consolidations approved at the EGM, the company said. The issue price represents a 93.2 per cent discount to EMS's last traded price of 2.2 Singapore cents, before the counter was suspended on Sept 26, 2016.

In a regulatory filing on Thursday, EMS noted that the financial effects of the acquisition cannot be determined as of yet, since the actual number of securities to be issued as consideration can only be determined following the valuation.

Nonetheless, in January this year, the group indicated that it expected to issue about 11.1 billion new EMS shares worth S$16.6 million for the stake in Nosco Shipyard. As at December 2018, the net asset value of the target was about 400.2 billion Vietnamese dong (S$23.3 million).

As EMS shares have been suspended, the company is required to submit a proposal to the Singapore Exchange Securities Trading (SGX-ST), with a view to resume trading.

SGX-ST previously granted the firm two extensions to enter into agreements with investors to address issues pertaining to its financial viability, and to demonstrate its ability to operate as a going concern. In March this year, SGX-ST granted EMS a further extension till June 30, 2019 for it to submit a resumption proposal. No further extensions will be granted.