Tee International sells Tee Land stake to Malaysia's Amcorp

MAINBOARD-LISTED Tee International has completed the sale of its 63.3 per cent stake in Tee Land to a unit of Malaysia's Amcorp Group for S$50.6 million in cash, or S$0.179 per share.

In addition, Tee International's former chief executive Phua Chian Kin has also sold his 5.5 per cent stake in Tee Land, comprising about 24.6 million shares at the same price, the company announced on Monday night. 

Amcorp intends to maintain Tee Land's listing on the Singapore Exchange. 

The proposed deal was first announced on Jan 13, 2020. The S$0.179 price represents a 9.1 per cent premium to the S$0.164 closing price of Tee Land on Jan 8, and a 5.9 per cent premium to the last transacted price on Jan 9, prior to a trading halt that day. 

Excluding expenses, Tee International expects net proceeds of S$48.3 million from the sale of its Tee Land stake. It plans to use these to repay loan or bank borrowings, for general working capital and/or any strategic investments or acquisitions. The divestment will also help it focus on the core engineering business, Tee International said last month. 

Tee Land has appointed Provenance Capital as the independent financial adviser (IFA) on this deal and other ancillary agreements. 

Separately, Tee Land has also entered into a sale and purchase agreement (SPA) to dispose of its stake in Tee Industrial to Tee International. 

Tee Industrial owns a six-storey industrial property with a gross floor area of 5,164 square metres at 25 Bukit Batok Street 22, which is also known as Tee Building. Other than the ownership and leasing of Tee Building, Tee Industrial is not involved in any other businesses.

Based on the valuation report by JLL dated Dec 11, 2019, the market value of Tee Building as at Nov 30 was S$21.5 million. 

However, among other things, as at end November 2019, Tee Industrial has an outstanding mortgage of about S$15.8 million and outstanding payables of about S$9.2 million owing to Tee Land, and was in a negative net asset position of about S$0.9 million. 

In view of this, Tee Land will dispose of Tee Industrial to Tee International for a nominal amount of S$1. 

According to the SPA, on completion of the disposal, Tee International will repay or procure the repayment of all outstanding payables owed by Tee Industrial to Tee Land, less the negative net asset value of Tee Industrial, which shall not exceed S$1 million.

Based on management accounts as at Nov 30, 2019, the group will receive cash of about S$8.4 million upon the completion of the disposal. This comprises S$1 for the sale share, and settlement of outstanding payables of about S$9.2 million, less the negative net asset position. 

The disposal is conditional upon approval of shareholders of Tee International and Tee Land, the discharge by Tee International of the mortgage, and the IFA noting that the terms of the disposal are fair and reasonable according to Rule 10 of the Singapore Code on Takeovers and Mergers. 

Tee Land is of the view that the disposal will strengthen the group's financial position, and reduce its leverage. 

JTC Corporation has provided Tee Industrial a grace period of up to July 30, 2020 to complete the Tee Industrial disposal to Tee International.

Upon completion of the disposal, Tee Land and Tee Industrial will also enter into a new lease for an area of about 8,000 square feet in Tee Building for a rental rate of about S$17,000 per month. The new lease will have an initial term of six months, with an option to renew for a further six months. 

Before both companies called for a trading halt on Jan 30, shares of Tee Land closed at S$0.174 on Jan 29, down 0.1 Singapore cent, or 0.6 per cent, while Tee International shares rose 0.1 cent or 2.1 per cent to S$0.049. On Tuesday morning, they requested to lift the trading halts.