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Travelite Holdings to buy associate's assets for S$374,800
LUGGAGE retailer Travelite Holdings is taking over the stock of a struggling associated company in an agreement inked on Friday, the board has said.
Wholly-owned subsidiary Demarco will pay S$374,800 in cash for the inventory and assets of its 35 per cent-owned Delsey Singapore (DSG) business and will source Delsey products exclusively from DSG for its retail and wholesale distribution business in Singapore and Malaysia.
The deal for the assets and inventory - which had a book value of some S$1.2 million as at Dec 31, 2017 - will be funded internally, according to the announcement.
The board said that the deal will help to achieve economies of scale for Demarco and is in line with the group's plan to optimise its distributorship rights in the region by re-entering the Malaysian luggage market. DSG's Malaysian unit has seven points of sale now.
Demarco used to be the appointed distributor for Delsey products, until DSG took over the distributorship in 2017.
But the business started turning losses after the handover, said Travelite's board.
It pointed a finger at capital constraints from the contractual terms of the takeover agreement, which it said led to a "thinly capitalised" DSG becoming funded mainly through shareholders' loans.
"With DSG's reappointment of Demarco as the distributor in Singapore and Malaysia, DSG will supply to Demarco on a wholesale basis and only incur minimal operating costs. Demarco shall in turn benefit from its 35 per cent share of DSG's profits and receive annual dividends," said the board.
"In view of the foregoing, the company is of the view that the entry into the proposed acquisition is in its interest."