AIR-CONDITIONING company Natural Cool Holdings is moving into the food and beverage business through a deal to acquire two snack manufacturing businesses for S$980,000 in cash via a new 80 per cent subsidiary, the company announced on Tuesday before the market opened.
Natural Cool has put up S$80,000 for an 80 per cent share in newly incorporated SFB Holdings. The remaining 20 per cent of SFB Holdings is held by one Leong Yew Meng, who also controls privately held Yummy YM and SFB Global. Yummy YM makes and sells cooked-food snacks such as pumpkin cakes and traditional Chinese dumplings, while SFB Global makes and sells soft drinks, bread, cakes, confectionary, mineral waters and soy-bean beverages.
SFB Holdings will acquire the businesses and relevant assets of Yummy and SFB Global from those companies for S$980,000 in cash. Natural Cool, but not Mr Leong, will provide SFB Holdings with a shareholders' loan to finance the acquisition and provide working capital to SFB Holdings. Mr Leong is an independent third party and upon completion of the transaction, will be a key management of SFB Holdings and assist with running the sale business, Natural Cool said.
The purchase price reflects the earnings potential of the acquired businesses as well as the value of the the assets, which have been independently assessed to be worth S$762,200, the company said.
The acquisition will allow Natural Cool "to foray into the food and beverage business as a means to build a potentially new source of revenue and profit", the company said.
Completion is targeted at May 18, 2019, and conditional upon due diligence and shareholder approvals, if necessary.
As an indicator of the potential impact of the acquisition, if the deal had been completed on Jan 1, 2017, Natural Cool's 2017 loss after tax would have widened to S$5.37 million from the reported S$5.32 million.