Oriental Food (Holdings) says the company, through its wholly-owned subsidiary, Oriental Investments Group, has entered into a conditional share sale and purchase agreement to acquire the entire issued and paid up share capital of Jiangyin Dingsheng Jinshu Yayan Co. from vendor Li Yi for RMB25 million ($4.9 million).

RMB20 million will be paid to the vendor within one month from the completion of the proposed acquisition with the balance to be paid within six months from the completion of the acquisition.

Establishment in 2008, China-incorporated Dingsheng has production facilities used in the manufacture and distribution of long steel products used in the manufacturing, construction and infrastructure industries.

As Dingsheng has no recent prior operating track record, Li Yi has granted to Oriental Investments Group an option to sell back the entire share capital if the latter does not, for 12 months period from 1 November 2010 to 31 October 2011, achieve an audited net profit after tax (NPAT) of RMB12.5 million or, for the 12 months period from 1 November 2011 to 31 October 2012, achieve an audited NPAT of RMB17.5 million.

Oriental Food had on 6 September 2010 convened an Extraordinary General Meeting to obtain shareholders approval to include the business of providing value added services relating to, as well as the procurement and supply of industrial and construction materials in the China as an additional core business of the group.

The resolution has been duly passed by shareholders. The acquisition represents the group’s investment in this new business of the group. The group is of the view that acquiring an existing production facility will accelerate the group’s entry into this business.