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SIA, Sats, DFASS sign share subscription deal for KrisShop

SINGAPORE Airlines (SIA), ground-handler Sats and duty-free retailer DFASS will invest over S$35 million for shares in travel retail joint venture KrisShop, with SIA taking a 70-per cent stake for S$24.9 million.

The three companies first announced they were setting up KrisShop Pte Ltd - previously Singapore Airport Duty-Free Emporium (SADE) - in March this year. KrisShop will be positioned as a travel retail business in Singapore that will offer inflight and ground-based duty-free and duty-paid goods.

SIA currently holds about 76 per cent of the JV company’s issued share capital and SATS holds the remaining 24 per cent. Under the agreement, SIA will now subscribe for about 2.34 million shares in KrisShop, while Sats will subscribe for 1 share and DFASS, for about 1.56 million shares. Upon completion, SIA will hold about a 70 per cent stake in the JV, while Sats and DFASS will each hold about 15 per cent. SIA will pay an aggregate of S$24.9 million for its subscription shares, while Sats and DFASS will pay about S$5.27 million and S$5.48 million respectively.

Meanwhile, KrisShop has also entered into a business transfer agreement with DFASS Sats (DSPL) - which is equally owned by DFASS and SATS Asia-Pacific Star (APS) - to acquire DSPL’s business of providing services and merchandise to SIA, SilkAir and Scoot Tigerair. The purchase price payable by KrisShop to DSPL for the business transfer is S$27.5 million. Based on the unaudited financial statements of DSPL for the quarter ended 30 September 2018, the book value and the net tangible asset value attributable to the assets related to the business transfer is S$15 million.

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On or around completion of the subscription and the business transfer, which is slated for 30 Nov, the parties will enter into definitive agreements relating to the JV, including a shareholders' agreement between Sats, SIA, DFASS and KrisShop. KrisShop will pay certain annual earn out payments to SATS and DFASS for certain commitments under agreement. Meanwhile, SATS and its subsidiaries, SATS Security Services and APS, will each enter into separate agreements with the JV for SATS or its subsidiary to provide certain services to KrisShop and Scoot as well as licence certain premises to KrisShop.

In the earlier March announcement, the companies said that the proposed joint venture will be able to build a valuable business over time by offering targeted products and services that will improve the travel experience for passengers, thanks to SIA's customer base of 30 milllion passengers per year, as well as Sats' expertise and DFASS' supplier network.

In another filing to the Singapore Exchange last month, it was announced that the transaction structure was being changed. Originally, SIA was meant to purchase 70 per cent of the issued share capital of DSPL. However, after discussions, the parties decided that the joint venture would instead be carried out through SADE, which was later renamed KrisShop.