A SECOND bid by investment and telecommunications firm Innopac Holdings to move into China's natural gas market has failed, with the firm now in negotiations to reduce the consideration paid for a related acquisition.
Innopac had in December 2013 acquired an 81.8 per cent stake in Extera from Rubic Prize. Extera held a 90 per cent interest in Dezhou Sheng Rong Gas, which owned and operated compressed natural gas (CNG) refilling stations and also distributed natural gas in Shandong.
The consideration of S$17.1 million was made through S$7.2 million in cash, and the issuance of 300 million new shares at 3.3 Singapore cents.
The amount was based on Dezhou Sheng Rong's plans and growth potential in the natural gas distribution in China, said Innopac in an announcement on Monday evening. But these did not materialise as expected, and Dezhou Sheng Rong ended its CNG business last year.
"As a result, the company had fully impaired the goodwill in FY2015, and had been in negotiations with Rubic to adjust and reduce the consideration paid," said Innopac.
The firm is proposing for Rubic to transfer to Innopac its remaining 18.2 per cent stake in Extera, and to return the consideration shares.
Innopac said that it will provide further updates upon finalisation of the documentation relating to the memorandum of understanding with Rubic.
Innopac had in 2011 made a S$2 million investment in another Chinese CNG firm, Grand Prosper Group. Grand Prosper did not have any operational CNG filling stations, though it had permits to build and operate a couple of stations.
Innopac eventually decided it would take too long before these CNG filling stations could be fully operational and impaired its investment in Grand Prosper.