Catalist-listed Mercurius Capital announced that it will be diversifying into the grocery business in Malaysia with its acquisition of Songmart Holdings for $36 million.
Mercurius is an investment holding compant that operates through three segments: Original design manufacturing (ODM) business; Bedding and bed linen retail business, and sourcing and procurement (S&P) business.
Songmart is an operator of mini markets, convenience stores and supermarkets in Malaysia. It currently has 12 of such outlets across Malaysia.
Upon acquisition, Songmart will then act as a special purpose vehicle (SPV) that will acquire Granville Grocery, another Malaysia-based company whose businesss the operation of department stores, supermarkets and retail sale of other food products.
The acquisition of Songmart will be satisfied with the issuance of 200 million new ordinary shares in the capital of Mercurius at 18 cents per share in three tranches.
The first tranche comprises some 66.7 million consideration shares, equivalent to about $12 million, which will be issued within six weeks from completion. The second tranche comprises also 66.7 million consideration shares, which will be issued within six weeks from the date on which the SPV's audited consolidated accounts is delivered to the company, subject to adjustments if the SPV does not achieve a profit after tax of RM15 million for FY2022.
The final tranch comprises the remaining 66.7 million consideration shares, which is to be issed within six weeks from the date on which the SPV’s FY2023 audited consolidated accounts are delivered to the company, subject to adjustments if the SPV does not achieve a profit after tax of RM16.5 million for FY2023.
Based on the pro forma consolidated management accounts of the SPV for the financial year ended December 31, 2020, the SPV posted profit after tax of approximately RM9.5 million ($3.1 million).
Chang Wei Lu, Mercurius' executive chairman and CEO says, "This strategic acquisition provides a platform for the group to diversify from our planned hospitality business in Thailand which has been progressing slowly amidst the uncertainties brought about by the Covid-19 pandemic. By diversifying into the more defensive groceries business in Malaysia, we hope to propel and transform the group towards long-term sustainability.”
"Looking ahead, we are laser-focused on growing our key market of Malaysia, and plan to aggressively expand our store network in the next few years. Beyond Malaysia, we plan to open Songmart and Granville stores in Singapore, Indonesia, Thailand and Vietnam, and are actively developing an online platform to complement our physical store strategy."
"Given the huge size of these markets, we have the ambition of becoming a 500-store group and ecosystem. We will work with Songmart’s management to achieve this in the next 3 years," adds Chang.
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Shares in Mercurius closed at 9.7 cents on July 12.
Photo: Mercurius, Songmart