HC Surgical to acquire remaining 30% stake in subsidiary Julian Ong Endoscopy & Surgery

HC Surgical Specialists (HCSS) on Friday said it has agreed to acquire the remaining 30 per cent stake of Julian Ong Endoscopy & Surgery (JOES), but the transaction is subject to certain conditions.

HC Surgical said it entered into a sale and purchase agreement (SPA) to amend the terms relating to the acquisition of the balance sale shares under the 2019 agreement.

It noted that as the Singapore Medical Council Disciplinary Tribunal is presently investigating a complaint lodged against Dr Ong, the acquisition will be conditional upon the outcome of the investigation.

Under the 2019 SPA, the acquisition was to be completed by Oct 31, 2021.

Following Singapore Medical Council's investigation, HC Surgical has amended the terms of agreement such that if Dr Ong is allowed by SMC to continue his medical practice, the company will buy the remaining shares after one year from the date of the investigation's outcome.

If Dr Ong is suspended for up to three years, the company will buy the remaining shares after one year from the end of the suspension.

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An amendment was also made to the employment terms of Dr Ong which initially called for a 10-year period starting April 1, 2017.

The new version will see his employment extended by Dr Ong working for a period of eight years from the date of the outcome in the event where he is allowed to continue his medical practice. If Dr Ong's medical registration is suspended for up to three years, the employment may be suspended during this period at the company's sole discretion, and shall be further extended by him working for a period of eight years in addition to the suspension period.

If the outcome does not fall under the two aforementioned scenarios, HC Surgical will have the right to consider its options under the terms of Dr Ong's existing employment contract.

Should the proposed acquisition proceed, the total purchase consideration for the balance sale shares will be an amount that is 10 times the audited profit after tax of JOES, after adjustments to exclude the expenses incurred in the form of the facility management fee, as well as Dr Ong's profit-share under the terms of his employment contract, if any, for the one-year period commencing from the month after the outcome if Dr Ong's registration is not suspended, or the month after the end of the suspension period, as the case may be, multiplied by 0.3 times.

HC Surgical said the purchase consideration will be satisfied in full with 50 per cent paid in cash to the vendors in proportion of their shareholdings in JOES on the completion date and the issuance of new shares equivalent to 25 per cent of the purchase consideration. The remainder will be paid in cash to the vendors two years after the completion date.

The purchase consideration purportedly also took into account the future potential of JOES, the synergistic benefits for the group, the results of Dr Ong's defamation suit against Serene Tiong, as well as the structure of the purchase consideration in tranches and the put options.

The aggregate cash payment will be funded by internal resources.

HC Surgical said the acquisition is in line with the group's long-term plans for growth, and that the working relationship between Dr Ong and the group will be enhanced. This will further improve the profitability of JOES, which will in turn also benefit the company.

Dr Ong has undertaken to the company in respect of the consideration shares not to sell, contract to sell, realise, assign, transfer, pledge, grant any option to dispose of or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of the shares.

HC Surgical shares closed at S$0.37 on Thursday, down 1.5 Singapore cents or 3.9 per cent.