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Sim Leisure's KidZania deal needs shareholder ratification after completion
INSTEAD of obtaining shareholders' approval before it buys the loss-making operator of KidZania, Sim Leisure will be seeking their approval by way of ratification after the deal has been completed.
Sim Leisure had applied to the Singapore Exchange (SGX) for a waiver from strict compliance of Catalist rules which require such prior approval.
The bourse operator on Thursday said it has no objection to this waiver, but the transaction must be ratified at an extraordinary general meeting (EGM) within three months from the proposed acquisition's completion date.
The company must also disclose in the shareholders' circular why the deal is in the best interests of Sim Leisure.
The theme park developer and operator this month proposed to acquire Rakan Riang, which operates family attraction KidZania, for RM3.8 million (S$1.2 million).
Rakan Riang's pre-tax losses amounted to RM1.4 million last year and RM4 million for the first half of this year. It is an 80-20 joint venture between Malaysian sovereign fund Khazanah Nasional's leisure and tourism arm and a unit of Malaysia-listed Boustead Holdings.
Rakan Riang operates a KidZania outlet at the Curve NX building in Petaling Jaya, Selangor.
Sim Leisure said it asked SGX for the waiver because of the time-sensitive nature of the transaction.
The proposed acquisition has to be completed urgently "due to circumstances of the target", and the sellers may also withdraw the offer if the deal is not completed in time, Sim Leisure noted in a filing on Thursday night.
Therefore, if the company had to seek prior approval from shareholders, this could lower its chances of success.
Sim Leisure added that there will be no material change in its risk profile after the acquisition, and thus there will be no prejudice to shareholders if the completion takes place before the company gets their approval.
Reasons for this include: there will not be any change in control of Sim Leisure; the group's core business will not change; there is no significant adverse impact on the group's earnings, working capital and gearing; and there is no expansion of the business to a new geographical market and/or business sector.
Moreover, Sim Leisure's substantial shareholders - chief executive Sim Choo Kheng, Tan Boon Seng and Mr Tan's restaurant chain operator Tropika Kiara - with a combined 79.9 per cent stake have irrevocably undertaken to vote in favour of the proposed acquisition.
The three substantial shareholders also undertook not to decrease their current shareholdings in the company until after the EGM has been convened.
That means the resolution for the deal would have passed even if a shareholders' meeting were held to approve the acquisition before its completion.
Shares of the Catalist-listed firm last traded at 22.5 Singapore cents on Thursday.