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SunMoon chairman reveals interest in debt-discharge deal
SUNMOON Food Co's executive chairman Gary Loh has informed the fruit product supplier that he and his wife have an interest in a recently announced debt-discharge deal.
SunMoon on Feb 10 announced a deal to discharge two China customers of US$1.03 million of debt in exchange for a 12 per cent stake in fruit retailer Harvest Season Singapore.
Although the company said at the time that no director or controlling shareholder has any direct or indirect interest in the deal, SunMoon announced on Friday that Mr Loh had informed the board on Thursday that he and his wife did in fact have an interest in the transaction.
Mr Loh and his wife currently own privately held SLS Atelier and GLOH Fresh.
SLS is currently in talks with Harvest Season vendor Tony Zhang to explore the use of certain intellectual property rights that belong to SLS, SunMoon said.
GLOH Fresh had previously also been in discussion with Mr Zhang in relation to the setting up of an online fruit trading business in China, and had provided certain advances to Mr Zhang for that purpose. The project was terminated in October 2015 by both parties, and some of those advances are still outstanding.
The board said it will reconvene to deliberate on the proposed deal again, but this time Mr Loh will abstain from making any recommendations, deliberations and votes.
The deal announced on Feb 10 was a conditional agreement by SunMoon to buy the Harvest Season stake from Mr Zhang in exchange for discharging the entire receivables owed to SunMoon by China-based distributors East China Marine Equipment and Shanghai Chibin International Trading Co, equivalent to US$1.03 million.
Mr Zhang will also have a two-year option to force SunMoon to sell all of its Harvest Season shares back to Mr Zhang at US$1.14 million, or a 10 per cent premium to the consideration price of US$1.03 million.
The transaction is economically equivalent to SunMoon giving a two-year term loan, backed by the 12 per cent stake in Harvest Season, with a principal amount equal to the receivables owed by the Chinese distributors.
If Mr Zhang can amass that money within two years, plus an additional 10 per cent, he can get back his Harvest Season shares. Otherwise, SunMoon will retain those Harvest Season shares.
This will be SunMoon's second attempt at getting a stake in Harvest Season, a fruit retailer with six stores in Zhenjiang and Nanjing in the Jiangsu province. The company also has an online fruit retail business.
SunMoon tried to acquire a 51 per cent stake in Harvest Season in 2015, but the deal lapsed in September.