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SMJ International planning acquisition of stake in China hotel management group

SMJ International Holdings is proposing to acquire a stake in hotel management group Beijing Libre Commercial Management Co.

Its wholly owned subsidiaries, Elite Management (Singapore) (EMSP) and Beijing Zhuoyue Tiancheng Business Management Co (BJZY), have entered into two agreements in relation to the proposed acquisition of Beijing Libre.BJZY will acquire 52 per cent of the enlarged equity interest in Libre Beijing for 15.59 million yuan (S$3.18 million), while the balance 48 per cent will be owned by Zhang Li.

Beijing Libre is a private limited liability company incorporated in China and is wholly owned by Mr Zhang, who is also the chief financial officer of Beijing Libre.

In addition, EMSP is being granted a call option by Mr Zhang and the Active Courage International (BVI SPV) to acquire all of the issued share equity interest in Libre Hospitality (HK SPV), which will - after a restructuring exercise - hold 48 per cent of the remaining equity interest in Beijing Libre. HK SPV will be wholly owned by BVI SPV which, in turn, will be wholly owned by Mr Zhang. The call option expires after five years.

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Beijing Libre and its subsidiaries are in the business of hospitality facilities management, including the management of hotels and resorts, provision of consultancy services, investment and branding. The group develops its own brands catering to mid- to high-end hotels and resorts targeting at growing Chinese travellers.

Beijing Libre, either directly or through its subsidiaries, has secured four long-term hotel management contracts in China.

Explaining the rationale for the deal, SMJ explained that since the disposal of its carpet furnishing business, it has been seeking to develop new businesses. "In their continued search for a new business to revitalise the group and to bring in more revenue and income streams, the directors have been exploring opportunities in those business industries. The company believes that there are significant opportunities in the Chinese tourism and hospitality industries," SMJ said.

"The group plans to finance the proposed transactions through the proceeds from the earlier disposal of SMJ Furnishings, the balance of the unutilised IPO proceeds and by the issue of consideration shares," added SMJ.

It said that the option consideration will be paid by way of the issue of new ordinary shares in the capital of SMJ at S$0.12 per share, which is 95 per cent of the volume-weighted average trading price of S$0.126 of the company's sharesfor trades done on the Catalist board on July 19, which is the last full market day of trading prior to the company's trading halt. 

After the deal, the board of Beijing Libre shall comprise three directors, of whom two will be appointed by BJZY. BJZY also has the right to appoint the CFO of Beijing Libre. 

Based on the proforma management accounts for the full year ended Dec 31 2017, the net loss after tax attributable to the shareholder of Beijing Libre was approximately 5.63 million yuan.

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