Transcu signs RTO deal with Straits Construction

STRUGGLING watchlisted biotech firm Transcu Group was heavily traded yesterday on news that it had moved ahead with plans for contractor Straits Construction to do a reverse takeover (RTO) of the company.

Some 309 million shares changed hands, and the counter closed unchanged at 0.2 cent.

Transcu said it had signed a conditional sale-and-purchase agreement (SPA) with the sellers of Straits Construction. This comes after a memorandum of understanding on the RTO was signed on Feb 24.

The sellers will inject the entire paid-up capital of Straits Construction into Transcu by buying new shares in Transcu at 50 cents each - the minimum issue price under listing rules. The shares will represent not less than 79.89 per cent of the enlarged share capital of Transcu.

The total purchase amount will be between $325 million and $338 million, provided that the consolidated net profit after tax of Straits Construction for end-2013 is not less than $42 million.

Koo Ah Seang, Transcu's executive chairman, said in a statement that Straits Construction has an established business and will give Transcu a new lease of life.

Straits Construction has been in Singapore since the 1960s. The company builds public housing projects, private residential projects and commercial developments. It has also expanded to China, where it is in a joint venture to develop a piece of land to build private residential apartments, a golf and country club, commercial areas and a five-star hotel.

Unaudited results for Straits Construction's 2013 financial year show a net profit of $42.1 million, down from $49.7 million in 2012. Revenue was $434 million in 2013, up from $417 million in 2012.

A series of corporate actions will take place before Transcu's deal is completed. They include a share consolidation, a rights and warrants issue, an equity-linked notes subscription agreement and a scheme of arrangement with creditors.

After the completion of the proposed acquisition, Transcu will have an estimated 20.4 billion shares with a share capital of $1 billion. The deadline for the proposed acquisition is Dec 31, 2014.

Transcu entered the Singapore Exchange watchlist last December after making three consecutive years of losses and having its market capitalisation fall below $40 million.

Formed from a reverse takeover of cinema operator Eng Wah at the end of 2008, the company is a Japanese firm that sells cosmetics and has a pharmaceutical segment that develops methods to deliver drugs through the skin. It also had a segment looking at renewable energy products.

But the company ran into cash-flow problems. Commercialising its pharmaceutical and green technology business needed more time and funds.

Its green energy unit, Biomass Energy Corporation, issued shares last October, resulting in a dilution of Transcu's stake in it to below 50 per cent.

The same month, Transcu said it was exploring the partial or full sale of its pharmaceutical and cosmetic businesses.

Yesterday, Transcu said it had entered into agreements to dispose of subsidiaries TTI Ellebeau and Dharma Therapeutics for one yen (S$0.012) each.

Both had negative net asset values as at end-2013. The disposal is expected to have a positive effect on Transcu's net tangible assets per share and earnings per share.