Two Japanese companies with common shareholders are making moves into a pair of Singapore-listed firms via sepa­rate reverse takeover deals worth US$3 billion ($4.03 billion). Even as specif­ics of the deals have sparked queries from the market regulator, the parties involved have maintained their case is sound.

On Nov 17 last year, Reenova Investment Holding announced an RTO deal worth US$1 bil­lion to acquire an entity called 3DOM Singapore. If completed, the company formerly known as ISR Capital will transition from trying to mone­tise a rare earth concession in Madagascar into one that is developing and selling batteries.

The enlarged entity will be controlled by Japan-based 3DOM Inc, which was set up in 2014. The company’s name is derived from the 3DOM (Three-Dimensionally Ordered Mac­ro-porous) separator used in its battery tech­nology. Its representative director Masataka Matsumura is described as a former creative director and the designer of “a Japanese fash­ion brand”. Matsumura first served as direc­tor and is now 3DOM Inc’s representative di­rector and president.

The rest of the company’s board is made up of director and chairman Hikari Imai, who was with Merrill Lynch Japan Securities, as well as director and chief technology officer Kiyoshi Kanamura, a professor of applied chemistry at Tokyo Metropolitan University and the devel­oper of the 3DOM separator.

But before Reenova’s RTO deal can be com­pleted, another 3DOM-linked entity has en­tered into another RTO deal: On Jan 31, Catal­ist-listed Sinjia Land announced it is moving towards becoming a sorghum producer once a US$2 billion RTO deal with Binex Singapore is completed. Previously known as components manufacturer HLN Technologies, Sinjia Land now deals with hostel management. Like 3DOM Singapore, Binex Singapore is controlled by 3DOM Inc via its subsidiary Binex Inc.

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In the Sinjia Land’s announcement, Binex Singapore is said to be in the business of cul­tivation, harvesting and selling of sorghum. It also produces, sells and does the licensing of biomethanol derived from sorghum, which can be also made into bio-pellets.

Sorghum is a cereal grain used as animal feed and in the production of alcoholic bever­ages and biofuels.

Under terms of the sale and purchase agree­ment (SPA), Sinjia Land will pay for the acqui­sition by issuing around 5.7 billion new shares at 35 cents each. This is at a 247% premium over the volume-weighted average price of 10.1 cents per share as of Jan 28, which is the last full market day prior to the execution of the SPA. Should the agreement go through, Binex Singapore will hold 96.99% of the shares.

Binex Singapore is 73.12% owned by Binex Inc — with 3DOM Inc holding a direct interest of 9.14%. In turn, Binex Inc is 60% owned by 3DOM Inc. Another shareholder in both Binex Inc and 3DOM Inc is Future Science Research, which is owned by 3DOM’s Matsumura.

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The valuation and the proposed RTO has drawn queries from Singapore Exchange Reg­ulation (SGX RegCo). One of the questions be­ing asked: How did Binex arrive at the indica­tive value of US$2 billion, given that it has not recorded any revenue and had only a net asset value of about US$900,000 as of Dec 31 last year?

In its response made on Feb 5, Sinjia Land stated that the US$2 billion figure is a minimum consideration that Binex Singapore hopes to at­tain. The figure, it adds, is based on a prelimi­nary valuation carried out by an independent reviewer last July. The Binex Singapore valu­ation was also calculated to be in the range of around US$2.515 billion to US$3.148 billion. As such, the acquisition would be at a discount.

For the purpose of this RTO, EY Corporate Advisors (EY) will be appointed as the inde­pendent reviewer, adds Sinjia Land. EY’s val­uation report will take precedence over the earlier independent review, and the consid­eration may be adjusted based on the actual valuation determined.

In an interview with The Edge Singapore, Binex’s representative director Hiromichi Aoki maintains that the Binex Singapore valuation is justified and that the future value of the entity is inde­pendent of its current book value.

Aoki, who is also the executive vice presi­dent of 3DOM Inc, says that EY will consider “the business model of Binex, future business plans as well as the IP, know-how, data and how Binex will deploy these and develop concrete project pipelines.” EY will also value the future prospects of the company, such as its potential growth and expansions.

Previously from shipping company Kawasaki Kisen Kaisha or “K” Line, Aoki adds that Binex Inc will license to Binex Singapore the technolo­gy and data related to sorghum, biopellets and biomethanol, which is very “unique and valu­able”. He also claims that the technology relat­ed to producing biomethanol is “very unique, no other company can produce biomass meth­anol from biomass materials like sorghum as Binex can.”

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Sinjia Land has said that Binex has the tech­nology to transform the sorghum stems and leaves into biogas, which is then liquefied into biomethanol. Biomass gasification plants and biomethanol synthesis plants are now located in Japan, which are owned by Binex Inc. Mean­while, Binex Singapore has already commenced talks with engineering, procurement and con­struction (EPC) companies to set up large-sized mass production biomass gasification plants and biomethanol synthesis plants.

As part of its queries, SGX RegCo also asked Sinjia Land to explain Binex’s revenue streams. The latter has replied that Binex will derive its revenue from the sale of sorghum planted, as well as sorghum derivatives like biomethanol and biopellets . In its reply to SGX RegCo, Sinjia Land also disclosed that Binex’s first project is in Peru, where an initial 5,000 hectares of land has been secured for planting sorghum in 2022. There will also be an option for an additional 25,000 hectares in subsequent years.

The cultivation of the seeds for the Peru farm is now ongoing in Australia. The project is ex­pected to start generating revenue in late 2022 or early 2023.

During the interview, Aoki says by properly utilising the technology, data and know-how, as well as the partners and clients that will take up the products, Binex Singapore will bring about more value larger than what’s indicated in the current book value. He adds that sorghum grains can be used for human or animal con­sumption, while the sorghum leaves and stalks can be used as material for biomethanol and biopellets, which will replace coal in coal-fired power plants and steel mills. Biomethanol can also be used as a substitute for fossil fuel in ve­hicles and other mobilities via direct combus­tion or as propellant for fuel cells.

What it means is that there will be syner­gy between Binex’s sorghum production and 3DOM’s batteries, as 3DOM has licensed its fuel cell technology to Binex. Aoki says this ad­vanced fuel cell is able to use biomethanol to ex­tract hydrogen, which can then be used to pow­er hydrogen fuel cell vehicles. He also envisions that the power generated from the fuel cells can also be used in combination with 3DOM’s bat­teries to store energy, which can then be used to charge electric vehicles.

It remains to be seen if market observers and share­holders of the companies involved will share the positive view painted by 3DOM Inc. What is note­worthy is how 3DOM Inc has focused squarely on the Singaporean market to gain a listing sta­tus for the entities it controls.

Before this, it also made similar overtures to another Singaporean-listed entity — restaurant operator Chaswood Resources. That deal was first announced on Aug 22 last year. But just 10 days after the sale and purchase agreement was signed on Nov 5, 3DOM Singapore scrapped the deal. In an earlier interview, 3DOM Singapore CEO Shusuke Oguro told The Edge Singapore that there were “differences in perspective and approaches to the implementation of the acqui­sition, and it was therefore determined to termi­nate the agreement”.

On Nov 17, 3DOM Singapore announced its RTO deal with Reenova. Under the terms of the agreement, Reenova will issue US$1 billion worth of new shares at 0.75 cent per share, which will be a 150% premium to Reenova’s last traded price of 0.3 cent before a trading suspension last November. Upon completion of the deal, 3DOM Singapore will end up owning 96.4% of the en­larged share capital of Reenova.

Like the Sinjia Land and Binex deals, SGX RegCo made queries to Reenova about its US$1 billion valuation for 3DOM Singapore, given the latter has a negative net book value of $1.3 mil­lion and made no revenue for FY2020. In its re­ply, Reenova said the US$1 billion figure is a min­imum consideration that 3DOM Singapore hopes to attain, based on a preliminary valuation carried out by an indepedent qualified valuer last July.

This valuation had formed the basis of the commercial terms, and 3DOM Singapore was valued at around US$1.355 billion to US$1.613 billion. Like Sinjia Land, Reenova says it has also appointed EY Corporate Advisors to determine the value of 3DOM Singapore. EY’s valuation re­port will take precedence over the earlier inde­pendent qualified valuer’s preliminary report.

The similar sequence of events and common shareholding of Binex and 3DOM Singapore aside, Binex’s Aoki claims that these transactions are “independent”.

He adds: “It happened that the timing for 3DOM Singapore’s RTO was similar to that of Binex Singapore.” Ultimately, the objectives for 3DOM and Binex is to “quickly access the Sin­gapore market and raise funds from the market, as well as to increase the companies’ presence in Singapore and Southeast Asia.”

Are sorghum plants and fuel cells worth the US$3 bil 3DOM Inc-linked RTO deals?

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