New Wave to acquire Alutech Metals Asiatic for S$2.8m

ELECTRONIC component supplier, New Wave Holdings, announced on Monday after market close that it will be acquiring Alutech Metals Asiatic Pte Ltd for some S$2.8 million.

Alutech Metals Asiatic was registered in Singapore in January 2010 with its subsidiary, Alutech Metals Co Ltd, incorporated in the People's Republic of China (PRC).

The principal activities of Alutech Metals Asiatic is that of an investment holding company, while its Chinese subsidiary is primarily involved in trading of aluminium alloy, steel, stainless steel and other metal products.

New Wave said the acquisition is in line with its strategic plan to develop and expand its aluminium product distribution business. In addition, the company intends to tap on the target group's marketing strength and customer network in China so as to strengthen its presence in the region.

In its filling to the Singapore Exchange (SGX), New Wave said it had on Feb 5 entered into a sale and purchase agreement with two independent parties, Tan Suan Dao and Hu Wing Ko, to purchase the entire stake in Alutech Metals Asiatic.

None of its directors or controlling shareholders of the company are related to the vendors, New Wave said. As at the date of the announcement, Mr Tan is a director of Alutech Metals Asiatic. Upon completion of the acquisition, Alutech Metals Asiatic will become a wholly-owned subsidiary of the company.

The purchase price was based on the target firm's consolidated unaudited profit before tax of S$693,610 for the financial year ended Dec 31 2017, and its unaudited net assets value and net tangible assets value of S$615,606 for the same period, as well as the target group's growth potential, New Wave said.

The consideration of S$2.8 million will be completed in two tranches. An initial consideration of S$2.4 million will be paid by S$600,000 in cash as well as the issuance of 120 million new shares in the company to the vendors at an issue price of 1.5 Singapore cents apiece.

This represents a 25 per cent premium to the volume weighted average closing price of the shares in the company, which was 1.2 Singapore cent for the full market day on the date the agreement was entered into. The issue of new shares will represent 6.95 per cent of the firm's enlarged share capital.

Subject to terms of the agreement, a second tranche consisting of a cash consideration of up to S$400,000 will be paid upon the PRC subsidiary achieving net profits after tax of not less than S$400,000, after excluding asset sales and other non-operational gains for the financial year ending Dec 31, 2018, New Wave said.

Should the Chinese subsidiary fail to meet this profit target, the further consideration will be adjusted accordingly, the company added.

The group intends to fund the cash payments of the acquisition with internal resources and S$0.93 million of the proceeds from the private placement exercise that was completed on Dec 21, 2015.

Among other things, completion of the acquisition is conditional upon the company being satisfied with the due dilligence exercise on each of the companies in the target group; as well as approvals, consents and licences for the transactions being obtained.

Assuming that the acquisition had been completed on April 1, 2016, and that the number of shares in New Wave increase from 1.61 billion to 1.73 billion following the acquisition, New Wave's loss per share would be narrowed from 0.07 Singapore cent to 0.04 Singapore cent.