Kitchen Culture proposes acquisition of 40% stake in sanitiser maker

CATALIST-LISTED Kitchen Culture Holdings has entered into a non-binding term sheet with Guangdong Fon-neus Environment Protection Technology Inc in relation to a proposed acquisition of a 40 per cent stake in Beijing Anxin Health Products Co, the company said in a bourse filing on Wednesday.

Beijing Anxin is a Chinese manufacturer of medical supplies such as masks and sanitisers. It owns and is licensed to use intellectual properties (IP) including "AnXin" brand sanitisers.

Kitchen Culture said it identified the business of Beijing Anxin as being synergistic with and complementary to its recently incorporated, wholly-owned subsidiary KC Medical Supplies, a medical and related supplies trading business.

Kitchen Culture said earlier in March that it intends to explore new areas of opportunities and alternate businesses, including healthcare and medical supplies solutions, artificial intelligence, machine learning and data science.

"Taking into account the current world economic situation and the Covid-19 pandemic, (Kitchen Culture's) board remains cautiously optimistic that the medical supplies trading business will be able to provide alternate revenue streams for the group," the company said.

The purchase consideration for the proposed stake purchase will be based on a valuation that is five times the price-to-earnings ratio of Beijing Anxin.

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The number of consideration shares to be issued will be 40 per cent of that valuation divided by 23 Singapore cents.

Kitchen Culture will satisfy the purchase consideration by issuing new ordinary shares to seller Guangdong Fon-neus based on an exercise price of 23 Singapore cents per share. This represents a 15 per cent premium over the closing price of 20 cents per share on May 19, 2020, and a 15.3 per cent premium over the volume-weighted average price of the shares at 19.95 cents on May 19, which is the last market day the shares were traded on the Singapore Exchange prior to the date of the term sheet.

Guangdong Fon-neus, a China-based manufacturer of environmentally friendly plastics and rubber materials, does not own any shares in Beijing Anxin. It has undertaken to procure the transfer of Beijing Anxin's entire shareholding to itself, and convert it into a wholly-held subsidiary, within three weeks from May 20.

The five conditions precedent for the proposed deal include Kitchen Culture's satisfactory due diligence of Beijing Anxin, approval from Kitchen Culture shareholders, as well as the completion of the shareholding, business and IP restructurings.

Beijing Anxin must also achieve a net profit after tax of at least 10 million yuan (S$1.9 million) for each of the first two financial years, or accumulate a net profit after tax of at least 20 million yuan for the first two financial years.

The company called for a trading halt at 7.35am on Wednesday, which it lifted at 1.52pm after the announcement.

Shares of Kitchen Culture were trading at 19.9 Singapore cents as at 3.33pm on Wednesday, down 0.1 cent or 1 per cent.