THERE WILL BE no general offer but a China strategic investor will pour in S$100 million cash into Asiatravel.com Holdings for its working capital and "to capitalise on any business opportunities as and when they arise."
The investor, Zhonghong Holding, had signed a MOU on 17 Sept 2015 with several Asiatravel.com substantial shareholders, including executive chairman Boh Tuang Poh, as part of its plan to mount the takeover.
GAME CHANGER FOR ASIATRAVEL.COM?
Zhonghong will inject S$100 million cash via a share placement (net proceeds to Asiatravel.com: S$96.8 million)
* Largest amount of funds ever raised by Asiatravel.com
* Amount exceeds the current market cap of Asiatravel.com of S$82.4 m (based on share price of 23.5 cents)
* Also, exceeds the paid-up capital of Asiatravel.com of S$53 m.
* Amount is nearly 4X the NAV of Asiatravel.com
* Zhonghong's investment signals that it sees Asiatravel.com as a gem despite it being loss-making for 5 consecutive years.
That would have led to Asiatravel.com -- a loss-making pan-Asia online travel and hotel reservation service provider -- being delisted from SGX.
Under the MOU, the substantial shareholders would sell their stake, totalling 51%, to Zhonghong, which is principally involved in the business of marketing, sales & development of commercial properties, particularly in tourism-related real estate such as theme parks.
At that time, Zhonghong, which is listed on the Shenzhen Stock Exchange and has a market cap of about RMB23 billion, held a 11.4% stake in Asiatravel.com.
Assuming Zhonghong had successfully bought all of the remaining 88.56% of the company, it would have to cough up S$93.2 million cash (based on its proposed 30-cent a share takeover price).
Boh Tuang Poh, executive chairman & CEO of Asiatravel.com Holdings.
NextInsight file photo.New deal
Yesterday (Nov 27), Asiatravel.com and Zhonghong jointly announced that the Zhonghong board has "resolved not to proceed" with the general offer.
Instead, as proposed by Asiatravel.com, a wholly-owned subsidiary of Zhonghong will take up a placement of 500 million new Asiatravel.com shares at 20 cents apiece. That amounts to an investment of S$100 million cash.
The placement price represents a discount of 15.2% to the volume weighted average price of S$0.2358 for trades done on SGX on 25 Nov 2015.
With the placement, Zhonghong will own 63.5% of Asiatravel.com.
There are several conditions precedent to be met, the key one being a waiver by the Securities Industry Council of a requirement for Zhonghong to make a general offer for Asiatravel.com.
If the placement goes through, it will pave the way for Zhonghong to parachute some of its own people into the board of directors and, perhaps, even the senior management.
Zhonghong's stake has room to rise: In addition to the placement shares, Zhonghong can exercise 400 m non-listed, non-transferable warrants, each of which can be converted into a share, at the exercise price of S$0.24.
A further 100 m non-listed, non-transferable warrants will be held by Zhonghong wich can be converted on a 1-for-1 basis also at S$0.30.
In aggregate, the warrants conversion could see Zhonghong pumping in another S$126 m into Asiatravel.com.
Even without the warrants money, the share placement exercise alone -- and the new war chest -- could prove to be a game changer for Asiatravel.com, which has been loss-making for the past five years.