GOLD miner and explorer Shen Yao Holdings (previously known as LionGold) has agreed to buy up to 3.55 million shares, or a 20.25 per cent stake, in loss-making property analytics firm Real Estate Analytics (REA) for about S$8.8 million from Wodabow Pte Ltd and its sole director Jean-Michel Paul.
This will be funded by issuing 2.93 billion new shares in the company at S$0.003 each, with the total consideration to be paid in four tranches upon fulfilment of certain conditions. The new shares issued will make up 8.23 per cent of Shen Yao's enlarged share capital upon the completion of all four closings.
The issue price for each consideration share represents a discount of about 30.23 per cent to the volume weighted average price of the shares for trades done on March 26.
Shen Yao said its management is familiar with the business and operations of REA as Yao Jiajia, its head of corporate investments, was a co-founder of REA and was employed as REA's lead data scientist for a year. Ms Yao is no longer a director or shareholder of REA.
In addition, Shen Yao shareholders last September also approved the expansion of the company's business to include engaging in financial investment activities. Shen Yao sees this as an opportunity to diversify its investment portfolio and risk-return profile.
As the deal is structured in tranches, the company need only increase its stake in REA when REA achieves certain business milestones that demonstrate its commercial viability. The transaction also allows for Shen Yao to nominate a non-executive director to the board of REA, which will enable the firm to mitigate risks while preserving the opportunity of generating returns for itself.
The transaction is expected to negatively impact its net profit and earnings per share.
The deal is subject to shareholders' approval at an extraordinary general meeting to be convened.