CFA Society Singapore
SINGAPORE (July 2): Kimly, the kopitiam operator, has acquired for $16 million a 100% stake in ASC which markets and sells a variety of drinks under its Asian Story brand and bottled water under its Simply Water brand.
Kimly said the acquisition is in line with the group’s strategy to expand its business through acquisitions, joint ventures or strategic alliances, which may include the vertical acquisitions of food manufacturers.
ASC’s “Asian Story” brand portfolio comprises nine different drinks including soya bean, winter melon tea, bandung and herbal tea. The Asian Story brand has a 7.7% market share and is ranked the No. 31 brand in the Singapore Asian drink market.
Other than its own portfolio of brands, ASC is also a distributor of certain other beverages to local provision shops, mini marts, coffee shops, hawker centres, wholesalers, schools and institutions.
As at March, the unaudited net tangible assets (NTA) of ASC was $448,000. The audited profits before income tax, minority interests and extraordinary items for the financial year ended Dec 31 2017 and the unaudited profits before income tax, minority interests and extraordinary items for the three months period ended March of ASC was $1.145 million and $0.5 million respectively.
According to a BDO Advisory report, the equity value of the sale shares is between the range of $23.5 million and $26.2 million with a base value of $24.8 million.
Under the acquisition deal, vendor Wang Chia Ye, who has more than 10 years of experience in the manufacturing and distribution of beverage, has entered into a three-year service agreement with the group and will join the group as the commercial director of ASC.
Wang is also entitled to an earn-out payment of $8 million when the PBT in the reference period from from Jan 1 to Dec 31 hits or exceeds $2 million. Kimly has the right to satisfy this all in cash or through the issuance of Kimly shares at 40 cents for up to $3 million with the remainder in cash. Assuming $3 million of the earn-out is paid in shares, the shares will represent 0.64% of Kimly’s enlarged share capital.
If PBT for the reference period is less than $2 million, the earn-out payment will be equal to four times the PBT and be made out only in cash.
Shares in Kimly closed at four 37 cents on Monday.