Q&M buys Chinese specialised dental materials maker for 80m yuan

Q&M Dental Group has signed a binding master agreement for a full stake in specialised dental materials manufacturer Qinhuangdao Aidite High Technical Ceramic Co for 80 million yuan (S$16.7 million).

This compares with the 76.5 million yuan deal for a 51 per cent stake agreed in a non-binding memorandum of understanding signed last November.

The news pushed its shares half a cent or 1.2 per cent higher to a one-year peak of 41.5 cents.

The revised deal was entered into by its unit, Q&M Dental Holdings (China) Pte Ltd, and sellers Li Hongwen and Li Bin.

Group CEO Ng Chin Siau told BT that the deal had not been revised much; it comes with an option for the sellers to buy 49 per cent of the special-purpose vehicle upon meeting the terms and conditions of their service agreements.

Of the 80 million yuan consideration, Q&M China is to inject 42 million yuan into Aidite as working capital and for further expansion. The remaining 38 million yuan will be given to the sellers "as a form of cashing out", he said.

"The deal was structured a certain way to avoid breaching rules and guidelines in China's context."

The deal is subject to a profit guarantee that Q&M China will receive dividends of at least 159 million yuan over 12 years.

Q&M said it took into account market conditions as well as Aidite's prospects and strategic merits into the consideration.

As at end-December 2012, Aidite's net tangible assets was 30 million yuan.

The company has been expanding its dental business in China. It has joint ventures with three dental groups in Beijing, Nanjing and Shenyang, and has acquired two dental clinics in Shanghai.

Q&M plans to fund the acquisition using internal resources, an International Finance Corporation loan facility granted in April 2011 and/or a new share issuance.