Aspial Corporation plans to privatise World Class Global (WCG), its 81.11%-owned subsidiary in an all share transaction through a scheme of arrangement. WCG closed at 9.2 cents on March 12, at a 32% discount to its net asset value of 13.61 cents. 

Aspial will pay 21 cents per scheme share, which will be fully satisfied via the allotment, as well as issue 1.1052 new ordinary shares in the capital of Aspial at an issue price of 19 cents per Aspial share.

The scheme consideration of 21 cents represents a premium of 107.9%, 89.2% and 73.6% to the three-, six- and 12-month volume weighted average price (VWAP) of WCG. It also represents a 128% premium over the last closing price of 9.2 cents as at March 12. 

There will be two different meetings for two different sets of shareholders. For the scheme to be successful, there needs to be, among other conditions, 50% support at the EGM for Aspial shareholders, and scheme shareholders representing 75% in value of the scheme shares for WCG shareholders.

The major shareholders cannot vote.  

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Aspial, which has a diversified portfolio of businesses including real estate, financial services and jewellery, says it intends to fully acquire WCG. 

Both Aspial and WCG have entered into an implementation agreement on March 12, to set out the terms and conditions on which the parties will implement the scheme.

WCG launched its initial public offering (IPO) on the Catalist board in June 2017, selling 136 million invitation shares at 26 cents each. It is primarily in the business of property development and investment in major cities in Australia and Malaysia.

As at March 12, WCG has an issued and paid-up share capital of $143.8 million comprising 915.9 million shares, of which 81.11% are owned by Aspial. It does not have any treasury shares and there are no outstanding options or convertible securities of the company.

Aspial’s CEO and executive director Koh Wee Seng, who is also WCG’s non-executive chairman, holds 22.75 million WCG shares, representing a 2.48% stake in the company.

Ng Bie Tjin @ Djuniarti Intan, independent and non-executive director at Aspial holds 1 million WCG shares, or 0.11% of the company’s entire paid-up share capital. The shares have been pledged to certain financial institutions as part of a collateral package.

Under the scheme, all of WCG’s shares excluding the ones already held by Aspial, will be transferred to the latter.

Based on about 173 million scheme shares – or 18.89% of WCG shares – held by the scheme shareholders as at March 12, the total scheme consideration stands at $36.3 million, which will be satisfied by the allotment and issuance of up to 191.3 million new shares in Aspial.

The number of shares in Aspial that each scheme shareholder is entitled to, will be rounded down to the nearest round number.

Holders of new shares in Aspial are entitled to FY2019 dividend of 0.25 cents per share.

The scheme consideration may be terminated should its conditions not be met on or before 5pm on August 12, being five months from the date of the announcement, or any other date agreed by both companies.

According to Aspial, it seeks to privatise WCG as it sees “minimal benefit” from WCG’s listing status than initially thought.

WCG has not carried out any fund-raising events on the SGX-ST since its IPO in 2017.

The performance of its shares has generally been on the decline since its IPO; since its IPO, the closing share price of the company has not traded over its scheme consideration since Jan 24, 2019.

“As such, investors at large appear to be unable to accord the WCG Group with a good valuation and the WCG share price may not be reflective of the underlying value of the WCG Group,” reads the statement.

“The decline in the company’s share price and the business environment have made it challenging for the company to undertake any meaningful fund-raising exercises independently, compounded by the potential dilution to shareholders interests,” it adds.

WCG has, so far relied mainly on Aspial for the funding of its working capital and is unlikely to tap on any access to the Singapore equity capital markets in the “foreseeable future”.

In addition, the acquisition allows Aspial to minimise paying double compliance and administrative costs in maintaining the listing status of both companies.

The acquisition, says Aspial, is “in line” with its intentions and strategic reviews and objectives to streamline its investments, businesses, operations and the corporate structure of the group.

Furthermore, it will minimise any potential conflicts of interests between both companies. Any transactions entered between Aspial and WCG will no longer constitute as interested person transactions, which will reduce expenses on both sides in adhering to the relevant regulatory and compliance requirements.

Aspial adds that its diversified earnings and credit standing would provide easier access to financing from financial institutions as well as debt and equity markets, and that the financial strength of the enlarged group can be used to support the WCG group to raise funds to pursue its business and growth objectives in the long run.

Aspial says it does not intend to introduce any major changes to the business of the WCG group, re-deploy its fixed assets, or axe any employees of the group with the exception of any internal reorganisation or restructuring.

Aspial, WCG and sister company Fragrance Group were all trading below their NAVs prior to this announcement, and all three have limited liquidity with less than 20% in free float.  

Shares in Aspial closed 0.1 cent higher or 0.7% up at 14.1 cents.