SINGAPORE (Apr 28): MMP Resources has announced a $118 million reverse takeover deal of a Tokyo-based company called GCM.

The company plans to pay for this acquisition by issuing 39.3 billion new shares at 0.3 cent each, which will increase MMP Resources’ share base from just over 2.3 billion to nearly 41.7 billion.

The seller is one Toshiyuki Takada, introduced to the company by Blue Pegasus Capital, one of its shareholders.

According to MMP Resources in an SGX announcement on April 28, GCM, which has been operating since 2005, provides financial and real estate services, and has plans to acquire properties as part of a smart city development in Japan.

For the financial year ended March 31 2020, the privately-held GCM reported earnings of US$21.1 million ($29.9 million) – a surge from US$2.1 million reported for FY2019 and itself a big jump from US$455,000 reported for FY2018.

As at March 31 2020, GCM has a net tangible asset value of US$105.9 million.

MMP Resources explains that the RTO deal will “finally” give the company a “strong balance sheet”, and grow and diversify its businesses and operations in a more consistent manner.

The company’s existing revenue-generating businesses are some ski resorts in Japan, which it says lacks scale and faces growth challenges.

“This deal will open up the real estate and financial services businesses, via an established Japanese company, and enjoy a more consistent and growing revenue stream,” MMP Resources says.

GCM now has no assets of presence in Southeast Asia but with the weaker economic conditions caused by the Covid-19 outbreak, there may be “ample opportunities” for it to invest or acquire distressed real estate assets across the region.

Up till 2015, MMP Resources was known as Sino Construction, until a new group of shareholders and board took over. As Sino Construction, the company was linked to John Soh, who is now on trial for his role in a market manipulation episode that culminated in the Oct 2013 crash of three penny stocks.