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EpiCentre Holdings announces planned reverse takeover

CATALIST-LISTED EpiCentre Holdings could be headed for a S$400 million reverse takeover, under a memorandum of understanding inked on Wednesday.

EpiCentre has also scrapped a renounceable non-underwritten rights issue proposed in 2017, and will instead launch new shares in a conditional placement agreement also made on Wednesday.

The reverse takeover would be done through the acquisition of the entire issued and paid-up share capital of investment holding company MacroCap Asia Capital, which owns Thai property developer Asia ThaiYuan, and Chinese hotel manager Gloria International.

It entails both the disposal of EpiCentre's Apple reselling business and a full divestment of the Japan IPL Holdings beauty business, in which the company took a 51 per cent stake for S$3.06 million in 2017.

The company would pay S$375 million for MacroCap and S$25 million for Gloria - a consideration reached on a willing buyer, willing seller basis after arm's-length negotiation - by issuing 1.74 billion new shares at S$0.23 apiece.

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The valuation of the targets is subject to valuation reports compliant with the bourse operator's requirements, EpiCentre added.

Asia ThaiYuan owns one, incomplete mixed-development project in Bangkok, while the Gloria group manages 52 hotels in China, EpiCentre said in its announcement.

EpiCentre said that it "believes that the proposed acquisition of the targets represents an excellent opportunity for the company to venture into new business areas that have the potential for growth".

It added: "As the group’s current business and operations continue to face headwind (sic) in an increasingly challenging and competitive environment, the proposed acquisition allows the company to acquire a major property development in the heart of Bangkok, while at the same time acquiring an established and reputable hotel management company, which will in turn potentially provide regular and growing revenue streams for the group."

Meanwhile, the new share placement exercise, with SooChow CSSD Capital Markets (Asia) as placement agent, would issue up to around 79.7 million new shares - about one-third of the enlarged share capital - at no less than S$0.12 a share, for net proceeds of some S$9,318,476.

Between 60 per cent and 70 per cent of the net proceeds would be used to repay of liabilities, while the rest would go towards general working capital, according to the company's announcement.

The placement exercise replaces a proposed rights-cum-warrant issue that would have raised S$15.79 million by putting out five rights shares and warrants for every existing share, at an issue price of S$0.02 for each rights share and an exercise price of S$0.10 for each warrant share.

Chairman and acting chief executive Kenneth Lim told The Business Times that the share placement "is more or less related to the upcoming reverse takeover".

"We're targeting more strategic investors who may bring more value for the company, given the business diversification," he said over the telephone.

The latest announcements came a day after the news that EpiCentre planned to dispose of its Apple reseller business here to a rival for just S$516,275, in a move that would chalk up a proceeds deficit of some S$950,000. The consideration in the disposal, it had said, would be used to pay down what is owed to suppliers.

The company has inked a conditional sale and purchase agreement for its four EpiCentre outlets with Elush (T3) Pte Ltd, which operates the iStudio reseller brand. The long-stop date for the deal is Oct 31, so the agreement will lapse if the conditions precedent have not been met or mutually waived by then.

EpiCentre said on Tuesday evening that it would focus on its beauty, wellness and lifestyle business under the Japan IPL unit, after the disposal. It plans to hold on to its Apple authorised reseller operations in Malaysia as well.

But Mr Lim said that the Japan IPL business, which contributed about 6 per cent of the group's latest half-year revenue, "will have to be disposed of eventually" too, "if we are going on board with this big business" in property development and management.

The proposed reverse takeover would need the green light from Singapore Exchange, as well as the approval of EpiCentre shareholders at an extraordinary general meeting.

EpiCentre most recently reported a net loss of S$2.6 million for the half-year to Dec 31, 2017, compared with a net profit of S$36,000 for the same period the year before.

It said in its latest financial statements that Apple and third-party product sales made up 93 per cent of its gross profit for the six months, while the disposal announcement on Tuesday said that the Singapore-based Apple-reselling business and assets made up 35.51 per cent of the group's net asset value and 2.37 per cent of its loss before income tax.

The counter closed down by 0.3 Singapore cent, or 5.77 per cent, to 4.9 Singapore cents on Wednesday.

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