Fabchem China proposes acquisition that will result in reverse takeover

FABCHEM China has on Monday entered into a non-binding term sheet for the acquisition of Australian power plant operator Renewable Power Management. This will result in a reverse takeover should the acquisition go through.

The company said in a regulatory filing that the term sheet was inked with Valiant Investments, GCAP Australia Investments and Gazelle Capital to acquire not less than 71.26 per cent of the shares in the entire issued and paid-up share capital of Renewable Power Management for at least S$22 million, or S$30 million if 100 per cent of the stake is acquired.

Valiant Investments, GCAP Australia Investments and Gazelle Capital are investment holding companies representing the majority investors that acquired Renewable Power Management in 2012.

The acquisition consideration will be satisfied in full by the issue and allotment of new ordinary shares in the equity capital of Fabchem to the three vendors in proportion to their existing shareholding interests in Renewable Power Management.

Mainboard-listed Fabchem said the acquisition represents a good opportunity for it to expand and diversify its businesses and operations, with a view to achieving more consistent and sustainable financial growth.

Fabchem manufactures initiation systems, and is the largest boosters and detonating cords producer within a supply regulated industry in China.

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Renewable Power Management owns and operates a biomass cogeneration power plant in Queensland. The company, incorporated in 1986, has a rated capacity of 30 MW and is accredited with the Australian Clean Energy Regulator, the statement from Fabchem said.

Renewable Power Management is solely in the business of power generation and the sales of electricity and carbon emission certificates. Its revenue stream comprises sale of electricity to the national grid, sale of Large-Scale Generation Certificates and sale of electricity and steam to the sugar mill from which the biomass plant receives part of its supply of feedstock in the form of sugar cane fibres or bagasse.

The proposed acquisition is subject to approval of the Singapore Exchange and shareholders at an extraordinary general meeting where Fabchem will be seeking the waiver from the requirement of a mandatory takeover offer by the vendors.

Also, Fabchem will seek to transfer the listing and quotation of its shares from the main board to the Catalist board of the bourse, subject to the required approvals. In connection with the move, it will appoint a Catalist sponsor.

What is noteworthy is arranger fees of S$2 million in total - a not insignificant amount - which will be payable to two arrangers, with the payment to be fully satisfied through the issue and allotment of new ordinary shares in the equity capital of the Fabchem.

Fabchem is valued at S$10 million subsequent to a proposed interested person transaction to sell a subsidiary for S$15 million and S$20 million.

The arrangers are not existing shareholders and are unrelated to the vendors and Renewable Power Management, said Fabchem.

The watch-listed Fabchem had asked for trading halt to be lifted after markets closed on Monday, and the counter was trading flat at S$ 0.15 when the request to suspend trading was made on Oct 9.