Struggling Ryobi Kiso will sell joint-venture unit to raise funds

EMBATTLED construction firm Ryobi Kiso Holdings will divest its entire interest in a geotechnical engineering subsidiary well below appraised value, to the joint venture's founder.

Ryobi Kiso, which has been under interim judicial management since March, inked a deal on April 9 to sell its 74.1 per cent stake in Ryobi Geotechnique to its minority shareholder for roughly S$14.5 million, according to a bourse announcement filed just after midnight on Saturday.

Ryobi Geotechnique, which does geotechnical engineering, ground imaging technology and real-time monitoring, has a book value of about S$12.8 million.

The proposed divestment, which Ryobi Kiso said would yield a net gain of nearly S$1.76 million, is part of a previously discussed plan to raise working capital for the debt-hit group.

But the group's net tangible asset per share would drop from 10.1 Singapore cents to 5.8 Singapore cents, had the deal been done on June 30, 2018, it noted.

An independent valuation done in October 2018 pegged the worth of the Ryobi Geotechnique interest at between S$21 million and S$23.6 million, but Ryobi Kiso has now argued that there are "limited options for the company to liquidate its investment in this joint venture".

It cited, among other factors, the lack of firm offers from other potential buyers, as well as buyer Wang Hou's day-to-day involvement in the subsidiary's operations, which it said would make it difficult to sell its own shares without Mr Wang's cooperation.

Ryobi Geotechnique's business has also taken a hit from the cloud of bad news surrounding its parent company, according to Ryobi Kiso. The company added that "disposal would be time-sensitive to prevent further deterioration of the value".

The planned sale, which would comprise S$12 million in cash and a waiver of all the unit's claims against other companies in the Ryobi Kiso group, will need either shareholders' approval or a waiver from the Singapore Exchange.

Ryobi Kiso disclosed that none of its directors - and as far as it could tell, none of its controlling shareholders - have any interest in the proposed disposal. It added that Mr Wang is also not an interested person, as defined by the Singapore bourse's rules.