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KLW disposing stake in Vietnam factory owner for US$7.02m

DOOR maker KLW Holdings said on Wednesday night that it is disposing its entire paid-up capital contribution in Key Bay Furniture for US$7.02 million to purchaser BTJI Industrial Co.

Through its subsidiary KLW Resources, it entered into a capital assignment agreement (CAA) with BTJI Industrial Co, which will fulfil the transaction fully in cash via two instalments. The purchaser has also paid a US$990,000 deposit for the deal.

The first instalment is about US$5.68 million, equivalent to 95 per cent of the transaction price minus the deposit, payable on the completion date – the date where all conditions are fulfilled. The second deposit of US$350,000 is payable six months after the completion date.

Key Bay is a Vietnam-based single member limited liability company with no business operations. It owns a factory on two adjoining plots of land totalling 56,519 square metres (sq m) located in the Binh Duong province. The land has a lease term of up to Sept 6, 2063.

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It is the sole owner of the factory, which has a gross floor area of about 25,542 sq m. The factory does not contribute to KLW’s operational profits as it has not commenced any operations or engaged in any business after construction was completed.

KLW said that the disposal will allow the group to realise the value of the vacant factory since it has unutilised or excess capacity at its existing manufacturing facilities in Malaysia and China. Proceeds from the disposal will be used for working capital needs for the group’s door business.

The deal is conditional on the Binh Duong Province Department of Planning and Investment approving the proposed acquisition in accordance with Vietnam’s investment laws. KLW must also satisfy listing rule requirements with the Singapore Exchange.

Key Bay has, on behalf of KLW, submitted and completed the tax finalisation for the proposed disposal with the Binh Duong Province tax authorities.

KLW has also entered into a written loan waiver agreement with Key Bay on its loans provided, confirming KLW has waived all outstanding loans with Key Bay at a day five days after the completion date.

If the conditions are not satisfied within three months of the signing of the CAA, purchaser BTJI Industrial Co may terminate the agreement with notice, or agree to extend the long stop date. The CAA may also be terminated at any time before the completion date by mutual agreement, or by either party in the event of material breach of obligations.

If the approval of the acquisition is not completed by the long stop date, the US$990,000 deposit paid by the purchaser will be returned no later than 10 days.

BTJI Industrial Co may also take possession of Key Bay’s land and factory for renovation and other purposes, as long as it indemnifies and holds Key Bay and KLW from any claim, damage, loss, liability, cost and/or expenses arising from the renovation and takeover.

KLW and BTJI Industrial Co have also agreed to an exclusivity period from the start of the CAA to the completion or termination date.

KLW shares were trading at 0.4 Singapore cent, up 0.1 cent or 33.3 per cent as at 9.46am.