METAL Component Engineering has entered into an agreement to acquire 51 per cent of Asiafame Group for S$8.4 million.
The sellers are World Forum Development Limited and Gold Paradise International Limited.
Asiafame Group wholly owns two subsidiaries incorporated in China that are primarily engaged in providing third-party testing and inspection services in China. The services provided include foundation inspection, construction material inspection, structural inspection, and road and bridges inspection.
The sale amount will be paid in two tranches. On the date of completion of the acquisition, an aggregate amount of S$4.9 million will be paid through the issuance of a non-convertible, redeemable, transferable, zero coupon bond in the principal amount of S$2.43 million. The bond will have a maturity of three years.
If Asiafame Group's net profit after tax for its first quarter of 2019 is equal to or more than 1.8 million yuan (S$361,000), an aggregate amount of S$3.5 million will be paid through the issuance of a non-convertible, redeemable, transferable, zero coupon bond in the principal amount of S$1.75 million, with a maturity of three years.
The existing business of Metal Component Engineering is to provide mechanical manufacturing solutions focusing on data storage, office automation peripherals, ATM and kiosk products. The group said it was facing a decrease in global demand for its customers' products, adversely affecting sales in Singapore. The plating lines in its Suzhou and Shanghai plants have also closed.
The group added that the acquisition will allow it to venture into a specialised industry and diversify its business and revenue stream.